d 57, /o Kong: Imports from the United States, and U.S. share of total imports, of selected groups of electronic components. 1969-72 " (in thousands of U.S. dollars) 1969 1971 1972 U.S. share U.S. share U.S. share Value (percent) Value (percent) Value (percent) Description Resistors — — 92 1 346 3 Capacitors 84 3 44 1 166 2 Color TV picture tubes — — — — 8 40 Diodes and rectifiers 114 148 8 714 30 Transistors 2,959 23 2.260 19 2.865 11 Integrated circuits — — 30 15 1,102 43 Total 3,054 12 2,574 9 5,201 10 1 Parts and accessories not included. Source: U.S. Department of Commerce. Bureau of International Commerce market survey. 57 The 10 major producers of computer memories and related electronic components are Fibri-Tek — Hong Kong Ltd.; Electronic Memories and Mag- netics, Ltd.; Lockheed Aircraft International Ltd.; Data Recall — Hong Kong, Ltd.; Data Magnetics — Hong Kong, Ltd.; Core Memories — Hong Kong, Ltd.; Ampex Ferrotec, Ltd.; Waltek, Ltd.; DSI — Hong Kong, Ltd.; and The National Cash Register Company, Ltd. The two largest firms are American- owned. They are Ampex Ferrotec, with about 3,000 employees, and Fabri-Tek, with about 1,000. U.S. subsidiaries in Hong Kong ship from 75 to 95% of the components they manufacture to the United States, and about 10% is sold on the local market. From 1 to 7% is shipped to Taiwan, Singa- pore, Japan, and South Korea. However, even the bulk of these components are first sent to the United States for final testing and approval and then re- turned to Hong Kong for sale American companies actively exporting electronic components to Hong Kong include Globe-Union, Inc.; Texas Instruments; Litronix, Inc.; General In- struments, Inc.; RCA Corporation; Sprague Electric Co.; Duluth Scientific, Inc.; and Monsanto, Inc. Other important foreign suppliers are the Japanese companies Mitsumi Electric Co., Ltd.; Hitachi, Ltd.; and Sony Corporation. The Dutch firm N.V. Philips and the German firm Siemens AG also sell compon- ents to Hong Kong. Prospects are excellent for increased sales in Hong Kong by American electronic components manufacturers in view of the present price competi- tiveness of U.S. -origin components vis-a-vis Jap- anese and other foreign-made products. Another major factor favoring greater market penetration by U.S. producers is the Colony's growing production of more sophisticated electronic end-products. American industry, the world's leading supplier of advanced components, should benefit from this trend. Trade sources report that U.S. exporters could increase their sales in the Colony by providing com- prehensive customer service, especially applications assistance. Hong Kong manufacturers also would welcome engineering and technical assistance in their changeover to production of more sophisti- cated electronic products. Buyers are especially interested in shortening de- livery times for supplies and in cutting freight costs Table 3. — Hong Kon^: Estimated production of con- sumer electronic products, 1971 and 1972 (quantity in thousands of units; value in thousands of U.S. dollars) 1971 1972 Quantity Value Quantity Value Radios 28,661 129,192 38,944 181,136 Calculators I 162 69 4,263 Tape recorders/ players 72 1,032 282 3,967 Microphones, loud- speakers, and amplifiers 257 174 457 638 TV receivers 8 346 1 39 Totals — 130,906 — 190,043 Source: U.S. Department of Commerce, Bureau of International Commerce market survey. on small orders. Deliveries from the United States now take from 1 to 2 months by sea and from 1 to 2 weeks by air, while shipments from Japan take less than half that time. A number of U.S. sup- pliers are now stocking components with quick turn- over in Hong Kong to offset delivery disadvantages. Import duties — Hong Kong is a free port; there are no customs duties, taxes, or other nontariff bar- riers applied to the importation of electronic com- ponents. Technical Requirements The electrical power supply characteristics in Hong Kong are 200 volts, 50 hertz for normal use and 346 volts, 50 hertz for industrial use. Both the English and the metric systems of weights and measures are used in the Colony, but the metric system is becoming more widely accepted. Published national standards for electronic com- ponents in Hong Kong may be obtained through the American National Standards Institute, Inc., 1430 Broadway, New York, N.Y. 10018. The following market research study, upon which this Country Market Survey is based, is available on loan from the U.S. Department of Commerce, Domestic and International Business Administration. Room I617M. Main Commerce. Washington, D.C. 20230: "The Market for Electronic Components in Hong Kong." DIB 74-05-505. November 1973. 58 Israel Israel: Size of market for selected groups of electronic components, 1969-77 Israel's success in selling electronic end products in the world market and its strong domestic demand for military communications equipment are the leading factors behind pre- dicted sharp increases in the country's purchases of electronic components during the years just ahead. An expected 18% average annual growth rate suggests a 1977 Israeli market of more than $36 million for the selected groups of electronic components covered in this survey. This would be nearly double the 1973 level of $18.9 million (see table 1). Similarly sharp in- creases in purchases of these components took place in the 1969-72 period, when sales climbed from $8 (in millions of u.s. dollars) million to $16.1 million. The Israeli electronics industry imports approxi- mately 90% of its electronic component require- ments since domestic producers cannot supply the full range of components at competitive world prices. The industry has abandoned any attempt to achieve complete self-sufficiency in production of basic electronic components, realizing that its com- petitive advantage lies in the production of electronic systems and subsystems with high value-added fac- tors. Imports of product category components, there- fore, are expected to keep pace with die growth rate predicted for the market as a whole. The import market should approach $33 million in 1977, as compared with $16.6 million in 1973. The vital role played by American electronics firms as investors, licensors, and technological ad- visors to Israeli electronics manufacturers seems likely to assure that the United States will remain the country's principal foreign supplier of electronic components. Purchases by U.S. subsidiaries and {^2 1969 I 1 1977 Resistors Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Product Category Definition Electronic components covered in this survey are basically confined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product category" as used in this pub- lication is limited to these six groups of components. 59 Israel — Selected Indicators (1972) Gross national product : $6.9 billion Population: 3.15 million Total country imports: $1,921 million Imports from U.S. (w/share of total): $368 million (18.7%) Total country exports: $1,147 million Exports to U.S. (w/share of total): $223 million (19.5%) Exchange rate (May 1974): 4.19 Israeli pounds =US$1 licensees are estimated to account for 65% of Israel's imports of product category components. Imports from the United States climbed from about $4.5 million in 1969 to nearly $8.2 million in 1972 (see table 2). If, as expected, U.S. suppliers retain their 1972 share (57%) of the annual import market, imports from the United States should ex- ceed $18.5 million in 1977. As significant quantities of American-made/de- signed components supplied from European central warehousing depots or European manufacturing facilities of U.S. companies appear in Israeli statis- tics as imports from third countries, the share of the country's import market held by U.S. suppliers is substantially higher than these figures indicate. Sales Opportunities U.S. manufacturers of electronic components are in an excellent position to capitalize on Israel's drive to expand its electronics industry through the appli- cation of new technologies. They are recognized by Israeli electronic engineers, many of whom studied in the United States, as world leaders in technology and design, and in quality, reliability, and variety of products offered. A market research survey recently conducted in Israel for the U.S. Department of Commerce, Office of International Marketing reveals that favorable sales opportunities exist for American exporters of the following electronic components: Integrated circuits. — Israeli purchases of IC's are forecast to surge from $6 million in 1973 to $14.5 million in 1977. The 25% average annual growth represented by this increase in consumption exceeds by far the 14% average annual rise predicted for sales of all other product category components. The buoyancy in demand for IC's became obvi- ous during the 1971-73 period, when sales jumped from $3.8 million to $6 million. Israel's effort to improve the competitive position of its electronics industry in world markets is largely responsible for the dramatic rise in the country's consumption of IC's. American exporters should be the chief benefici- aries of the rapidly expanding Israeli market for integrated circuits. Israel imports 90% of its total IC requirements, and 70% of the imports are of U.S. origin. Computer firms are expected to offer the most attractive sales opportunities to U.S. sup- pliers of IC's by virtue of their plans to expand and diversify their production of minicomputers and computer peripherals. These plans received new impetus when a controlling interest in the leading manufacturer, Elbit Computers, Ltd., was acquired by Control Data Corporation of Minneapolis. Although many Israeli electronics manufacturers have designed their own circuitry, they rely mainly on foreign sources of supply to meet their IC re- quirements. U.S. exporters, will find that COS/MOS digital, MSI bipolar digital, and linear IC's offer the greatest sales potential. Transistors. — The market for transistors amount- ed to $4.2 million in 1973, which was well above the 1971 level of $3.6 million. Transistor sales are projected to total $7 million in 1977, of which $6 million probably will be imported from the United States and from European-based manufacturing subsidiaries of U.S. firms in a roughly 50/50 ratio. Although the average annual growth rate for this segment of the market — projected at 14% during the 1973-77 period — will eventually be slowed by increased use of IC's and the leveling off of TV receiver production, all types of transistors are ex- pected to be in high demand throughout the 1970's. U.S. exporters should have particular success in selling silicon and microwave transistors. Capacitors. — While Israel manufactures substan- tial quantities of certain types of capacitors, the bulk of this production is exported. About 80% of the country's requirements for these devices are satis- fied through imports, which, in 1972, totaled $2.5 million. Nearly $1.3 million of these imports were of U.S. origin. Sales of capacitors are expected to rise from $3.7 million in 1973 to $6.2 million in 1977, with imports climbing to almost $5 million in the latter year. Israeli buyers are particularly in- terested in ceramic and fixed electrolytic capacitors. Diodes and rectifiers. — The outlook for 1977 suggests that consumption of diodes and rectifiers will reach $4.3 million, up from $2.6 million in 1973 and $1.8 million in 1971. Since there is no local production of these components, Israeli users rely on imports to 'fill their needs and are likely to continue to do so for the foreseeable future. U.S. firms held an estimated 60% of the market during the 1969-72 period. European manufacturers ac- 60 counted for the balance, which consisted mainly of diodes and rectifiers used in the manufacture of telephone exchanges. Market anlysts report strong buyer interest in silicon diodes, zener diodes, and power rectifiers. Resistors. — Electronic equipment makers import approximately 95% of their requirements for re- sistors, since Israeli production of resistors is lim- ited primarily to high-cost precision types little used by domestic industry. Imports amounted to slightly more than $2 million in 1972, of which 37% rep- resented sales by American firms. Imports are pro- jected to reach $3.8 million in 1977. Israel's con- sumption of resistors in that year is expected to total $4.2 million, a substantial rise over 1973's total market of $2.5 million and almost 250% above the 1971 level of $1.7 million. Sales prospects are brightest for fixed composition and fixed film resistors. Other electronic components. — Israel's expendi- tures for electronic components outside the product category in 1972 included $3 million for connectors, the bulk of which were imported from the United States. Growth in this segment of the market is ex- pected to average 14% per year between 1973 and 1977. U.S. exporters will find opportunities to sell rack and panel connectors, circular connectors, co- axial connectors, and printed circuit connectors. The United States is a regular supplier to Israel of electron tubes for use in industrial and military equipment. The market for these tubes is expected to average $2.5 million annually through 1977. The sales potential is highest for diode rectifiers, thyra- trons, HP transmitting tubes, microwave tubes, and industrial and military receiving tubes. Selected End-User Industries The urgent needs of Israel's defense establish- ment sparked the development of an electronics in- dustry that has gone far beyond its original goal of increasing the country's military self-sufficiency. The industry has become a vital source of foreign ex- change and an employer of 12,000 people. Utilizing their Nation's ample reservoir of low-cost engi- neering talent, Israel's 65 electronics manufacturers have steadily diversified their output to include ci- vilian telecommunications systems, computers and computer peripherals, medical and scientific instru- mentation, and industrial process control systems. The industry's output rose from a modest $3 million in 1961 to a substantial $157 million in 1972. Ac- cording to the Plan for the Development of Industry in Israel, 1971-1976-1981, published in November 1972 by the Ministry of Commerce and Industry, production should reach $300 million in 1977. The outbreak of war in the Middle East in Oc- tober 1973, while redirecting manufacturers' atten- Israel — The Electronics Industry Basic Data (1972) Total value of production: $157 million Number of manufacturers: 65 Industry labor force: 12,000 Output of principal electronic com- ponents user industries — Consumer products indus- tries (est.): $20.2 million Industrial/ commercial equip- ment industries (including military telecommunica- tions equipment industry:) $117.1 million tion to the military sector of the market, is expected to slow the industry's growth only temporarily, if at all. Government economists tend to maintain their original view that annual increases in production will average 13.5% between 1973 and 1978 and 15% thereafter. Exports may be hampered, however, be- cause so little military equipment will be available for sale abroad. Israel's total exports of electronic finished products and components, estimated at $50 million in 1972, had been expected to rise by an average of at least 20% per year through 1978. The Israeli Government plays an important role in determining the course of the country's industrial development, attracting foreign and domestic capital with low-cost loans and direct cash grants and boost- ing the profit margins of eligible enterprises through preferential tax treatment. Recipients of these bene- fits are selected according to a variety of criteria, in- cluding their potential contribution to the defense effort, probable success in exporting their products or reducing Israeli dependence on imports, ability to help absorb the flow of immigrants, and willing- ness to locate in one of Israel's underpopulated "de- velopment zones." Additional incentives improve the ability of Israeli exporters to compete with the larger industrial countries in world markets. These incentives include subsidies, such as rebates of in- direct taxes approximating 20% of the value-added; refund of customs duties and purchase taxes on ma- terials used to produce exported goods; favorable export financing and assistance with certain trans- portation costs; and loans and grants of funds for export promotion. Measures such as these, covering almost every aspect of corporate finance, have been a major factor in stimulating the rapid growth of the entire electronics industry. With an eye to the industry's future, the Govern- ment actively fosters research and development in the field of electronics as it does in other areas. Spe- cific projects — usually defense -related — are con- ducted in Government-owned plants, and grants are made to private enterprises on a matching funds 61 Table 1 . — Israel: Size of market ' for selected groups of electronic components, 1969-77 (in thousands of U.S. dollars) Description 1969 1971 1972 1973 1974 1977 Resistors Production 40 730 2,205 3,300 4,300 9,400 Imports 1,032 1,644 2.042 2,300 2,600 3,750 Exports 30 689 2,100 3,150 4,100 9,000 Market size 1,042 1,685 2,147 2,450 2,800 4,150 Capacitors Production 1,400 1,500 2,300 2,650 3,150 5,200 Imports 1,775 2,492 2,480 2,900 3,250 4,850 Exports 830 898 1,575 1,900 2,250 3,900 Market size 2,345 3,094 3,205 3,650 4,150 6,150 Color TV picture tubes Production — — — — Imports — _ — 450 975 Exports — — — 450 975 Market size — — — — — Diodes and rectifiers Production — — — — — — Imports 1.150 1,850 2,250 2,550 2,900 4,300 Exports — — — — — — Market size 1,150 1,850 2,250 2,550 2,900 4,300 Transistors Production2 500 805 650 950 1,150 1,950 Imports 2,157 3,039 3,222 3,540 4.020 5,960 Exports 150 240 190 290 370 810 Market size 2,507 3.604 3,682 4,200 4,800 7,100 Integrated circuits Production2 380 600 500 700 875 1,700 Imports 620 3,200 4,300 5,300 6,625 12,800 Exports — — — — — — Market size 1.000 3,800 4,800 6,000 7,500 14,500 Totals Production 2,320 3,635 5.655 7,600 9,475 18,250 Imports 6,734 12,225 14,294 16,590 19,845 32,635 Exports 1,010 1,827 3,865 5,340 7,170 14,685 Market size 8.044 14.033 16,084 18,850 22,150 36,200 1 Size of market equals production plus imports minus exports. Parts and accessories not included. ■ Production figures for 1969-73 include components manufactured by OEM's for their own use. In-house production of transistors rep- resents 50% of the total and that of integrated circuits, 60%. Source: US Department of Commerce, Bureau of International Commerce market survey. basis for development of products deemed likely to Industrial/ commercial equipment sector. — The be commercially successful. Grants to the electronics industrial/commercial equipment sector of Israel's industry have grown sharply in recent years, rising electronics industry is rapidly increasing in impor- from $2.5 million in 1970 to $3.6 million in 1971 tance as a market for electronic components. Pre- and $4.5 million in 1972. dictions made just prior to the outbreak of war in The availabiliy of low-cost manpower, particu- October 1973 indicated that this sector would play larly engineers and skilled factory workers, is of a much larger role than the military equipment enormous assistance to Israel in its drive to expand sector in the 13.5% average annual growth forecast electronics industry output to assure a rising flow for the industry as a whole between 1971 and 1978. of exports. An increase in the number of university Leading manufacturers — all of which formerly students opting for engineering careers and the ar- made electronic equipment exclusively for the Is- rival of skilled immigrants from abroad have over- raeli military establishment and a few foreign cus- come the shortage of engineers that developed dur- tomers — have stepped up their efforts to add export- ing the industry's early years. The supply of un- able industrial and commercial equipment to their skilled labor is being augmented by increasing num- product lines. Most of the $61.9 million in capital bers of women entering the labor force and by an investment suggested by Government planners as influx of workers from the occupied territories. being appropriate for the electronics industry during 62 the 1972-76 period is likely to be earmarked for the development and further expansion of nonmili- tary production. The industrial/commercial equipment sector is composed of approximately 40 firms employing an estimated total of 7,000 persons. Production, includ- ing that of military communications equipment, amounted to $1 17.1 million in 1972, compared with $81.2 million in 1970.1 The great bulk of this pro- duction, in fact 80% of the output of the entire elec- tronics industry, is accounted for by six corpora- tions: Elron Electronics Industries, Ltd.; Elta Elec- tronics Industries, Ltd.; MBT (Plant B, Israel Air- craft Industries, Ltd.); Motorola Israel, Ltd.; Tad- iran Israel Electronics Industries, Ltd.; and Telrad Telecommunication and Electronic Industries, Ltd. Communications equipment. — The communica- tions equipment subsector is the core of the Israeli electronics industry and the key to its growth dur- ing the next several years. The 10 firms engaged in the manufacture of civilian and military com- munications equipment employ the majority of the electronic industry's workforce and account for a major share of its production. Trade sources esti- mate that output of military communications equip- ment, including such items as manpack, vehicular, and airborne radios; single side-band radios; mo- bile, base, and walkie-talkie two-way radios; and radar equipment (S-band and position indicators) totaled $30 million in 1972. Production of main and private branch telephone exchange equipment, estimated at $14 million for 1972, jumped to $24 million in 1973. Israeli firms in this subsector also make data transmission equipment (data and other modems, including FSK) and antenna systems. The United States has provided the technological basis for Israel's manufacture of military commu- nications equipment. However, most of the license agreements covering production of civilian telecom- Expressed in terms of 1972 prices. munications equipment are with European com- panies, including DEL Telecommunications of France; Hasler AG, Standard Telefon and Radio, Gfeller S.A., Schprecer & Schuh, and Albiswerk Zurich of Switzerland; AEI, ATE, GEC, and Key- switch of the United Kingdom; and the ITT sub- sidiary Standard Elektrik Lorenz AG of Germany. Israel's largest and most diversified electronics firm and a leading manufacturer of communications equipment is Tadiran Israel Electronics Industries, Ltd. Tadiran, which reported sales of $65 million in 1972, is a joint venture between the U.S. firm, GTE International, Inc, and Israel's giant Koor In- dustries and the Israeli Ministry of Defense. The company employs 3,500 persons, more than any other firm in the industry. Tadiran's line of military communications equip- ment consists of such products as field tactical radio equipment, field radio relays and multiplexers, com- munications centrals, and field telephone equipment. Its production is based on technology obtained pri- marily from U.S. firms, including Sylvania Electric Products, Magnavox, and Lenkurt Electric. Civilian PMBX's, PABX's, communications and central sys- tems, and carrier equipment are produced under license from GTE and Superior Continental Cor- poration of the United States. Tadiran's share of the 1973 domestic telecommunications market, as allo- cated by the Ministry of Communications, was 35% for public main exchanges and 50% for PABX's. Telrad Telecommunications and Electronic Indus- tries, Ltd., and its subsidiary, Keren Electronica, Ltd., had the major share of the 1973 domestic mar- ket for civilian telecommunications equipment: 60% of the public main exchanges, 100% of the Stroeger main exchanges, 40% of the PABX's, and 98% of the telephone instruments. Telrad, which has licens- ing agreements with European subsidiaries of ITT, reported 1972 sales of $16 million. Elta Electronics Industries, Ltd., a subsidiary of the Government-owned Israel Aircraft Industries, Table 2. — Israel: Imports from the United States, and U.S. share of total imports, of selected groups of electronic components, 1969-72 ' (in thousands of U.S. dollars) 1969 1971 1972 U.S. share U.S. share U.S. share Description Value (percent) Value (percent) Value (percent) Resistors 491 47.6 752 45.7 756 37.0 Capacitors 1,196 67.4 1,477 59.3 1.258 50.7 Color TV picture tubes — — — — Diodes and rectifiers 690 60.0 1,110 60.0 1,350 60.0 Transistors 1,655 76.7 2,005 66.0 1,787 55.5 Integrated circuits 434 70.0 2,240 70.0 3,010 70.0 Total 4,466 66.3 7,584 62.0 8,161 57.1 1 Parts and accessories not included. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. 63 Ltd., and the third member of Israel's "big three" in electronics, reported sales of $14.5 million in 1972. Almost all of its production is defense-ori- ented and includes aviation communications equip- ment and systems, radar systems, and portable ve- hicle-mounted naval and airborne transceivers. UHF communications equipment is produced under license from the American firm, Admiral Corporation. Elta recently expanded its activities to include the manu- facture of medical electronic equipment and indus- trial control systems. The communications division of Motorola Israel, Ltd., a subsidiary of the U.S. firm, makes two-way and other communications equipment and systems, portable mobile and base stations, paging systems, and data modems. The company's total sales for 1972 were estimated at $14 million. Motorola's exports of radio communications equipment to de- veloping countries, especially African nations, have been a major factor in the emergence of Israel as an exporter of electronic equipment. American Electronics Laboratories (Israel), Ltd. (AEL), a subsidiary of the U.S. firm, makes VHF/ UHF power amplifiers, wide-band FM broadcast power amplifiers, fixed and mobile communication centers, telephone exchanges, and custom-designed microwave communications systems for military use. AEL is pioneering in the manufacture of semielec- tronic switchboards under license from Albiswerk Zurich of Switzerland. The company's annual sales approximate $5 million. The future prosperity and expansion plans of the telecommunications equipment subsector, and indeed of the Israeli electronics industry as a whole, de- pend entirely on its ability to turn out the kind of products for which there is strong demand in for- eign markets. Electronics manufacturers have long realized that Israel's own needs for military and civilian communications equipment form too nar- row a base on which to build their future. Trade analysts expect that the importance of military equip- ment in Israeli exports of electronic end products will decline as the industry further develops its line of data transmission and other sophisticated tele- communications equipment. The industry has been keeping fairly well abreast of the state of the art in electronics; thus, there should be little delay in in- corporating recent technological advances such as MOS and LSI circuitry. Consumer products sector. — The consumer elec- tronic products sector is of relatively minor impor- tance in the Israeli market for electronic compo- nents, accounting for only about 5% of the total. Within the context of Israel's political and economic struggle for survival, the demand for consumer goods has had to give way to more pressing economic priorities. A prime example of this factor, as it af- fects the electronics industry, has been the Govern- ment's repeated postponement of the inauguration of color TV broadcasting. Output of consumer electronic products — mono- chrome TV sets, car radios, and an insignificant quantity of intercoms and stereo phonograph sys- tems— totaled about $20 million in 1972. Market analysts predicted in mid- 1973 that annual produc- tion would approach $30 million in 1977. This would reflect an average annual growth rate of 8.5% for the sector, well below the 13.5% forecast for the electronics industry as a whole. The events of Oc- tober 1973 could dictate a downward revision of this figure, however, since manufacturers may be hard pressed to maintain production of industrial and commercial equipment for export — much less continue making consumer products — while at the same time struggling to fill military orders. Television receivers. — The manufacture of mono- chrome TV sets accounts for approximately 90% of total consumer electronic products output and occupies the great majority of the sector's 2,000 employees. Production, however, is on the decline. A total of 55,336 sets were assembled in 1972, compared with 68,877 in 1971, the TV receiver industry's peak year. Not only is the market approaching the saturation point (68% of Israeli families now own a TV set), but many who would like to buy their first set or replace an old set are awaiting the arrival of color TV broadcasting. The trend toward the purchase of a second TV set is not likely to give the domestic industry much of a boost, since most second sets are portables and all portable sets are imported. The TV receiver industry does not intend to ex- pand its plant facilities or its output, pending the introduction of color television. Most of the firms, however, have readied contingency plans to assemble color TV sets. In fact, one company has said it will begin making color TV sets for export in 1974, starting with an initial annual production of 3,000 sets. Seven manufacturers share the TV receiver mar- ket, a situation that tends to make it difficult for any one of them to significantly improve its position. Four companies — Amron, Ltd. (licensee of Nord- mende of Germany); Philco, Ltd. (subsidiary of the U.S. firm); Pilot, Ltd. (subsidiary of the United Kingdom firm); and Ralfo Israel, Ltd. (licensee of Metz of Germany) — account for 80% of total an- nual sales. Three others, including Tadiran (under license from Voxson of Italy) and subsidiaries of Salora (Finland) and Zenith (U.S.), make up the balance. Israeli TV set makers import most of their com- ponents and parts, although onp or two firms as- semble their own tuners. Thr in i tern is likely to remain unchanged when c( lor TV telecasting is 64 introduced, opening up a new market to foreign- made color TV picture tubes and other components. The Competitive Environment Israeli output of product category components is expected to rise by an average of 25% per year, climbing from an estimated $7.6 million in 1973 to more than $18 million in 1977. During this pe- riod, production of resistors should almost triple from $3.3 million to well over $9 million, and out- put of capacitors should rise from $2.7 million to $5.2 million. The value of transistor production is projected to reach $2 million in 1977, compared with $950,000 in 1973. Output of IC's is forecast to advance from $700,000 in 1973 to $1.7 million in 1977. Despite these substantial increases in production, Israel's electronic components producers will con- tinue to play only a minor role in supplying the re- quirements of the country's electronic end products manufacturers. Most Israeli-made components are designed for the export market. Aggregate sales of resistors, capacitors, and transistors to European and American customers are forecast to approach $15 million in 1977, up from their 1973 level of $5.3 million. Nine companies are engaged in the manufacture of product category components in Israel; two others make connectors, and one makes relays and recti- fiers (other than semiconductor). Some of these firms are end product manufacturers that initially made only small quantities of components for in- house use or for sale to other Israeli manufacturers. Others were established by foreign firms that con- sider Israel a favorable locale from which to supply international markets. The influence of American manufacturers prevails throughout Israel's electronic components industry. Only one producer — Elta — is wholly Israeli- owned. The thick/thin film hybrid modules, trans- formers, and microwave tubes Elta makes — some of them under license from Varian Associates (U.S.) — accounted for only a small part of its 1972 sales of $14.5 million. Elta's total production of these components is either absorbed by its own plants or sold on the domestic market. Tadiran makes a wider variety of electronic com- ponents than any other Israeli company. Its product line includes semiconductors (small signal and power transistors, linear integrated circuits, thick film hy- brid integrated circuits); crystal products (quartz crystals, filters, and discriminators for communi- cations equipment); and transformers and coils. Tadiran's own plants use 50% of the output; 20% is sold to other Israeli users, and 30% is exported, principally to European markets. License agree- ments applicable to Tadiran's component production include accords with Western Electric and Damon Engineering, both of the United States. One of the fastest-growing Israeli electronic com- ponents manufacturers is Vishay Israel, Ltd., a wholly-owned subsidiary of Vishay Intertechnology, Inc. (U.S.). Virtually its entire output of precision resistors and potentiometers is exported to the United States. Another leading Israeli exporter of electronic components is Microelectronics, Ltd., which is a licensee of JFD Electronics Corporation of the United States. Microelectronics is owned, through an Israeli holding company, by the U.S.-based Whit- taker Corporation. It exports 70 to 80% of its production of capacitors (variable glass, variable ceramic, variable air, fixed multilayer, and mono- lithic), mainly to European buyers. A Microelec- tronics subsidiary, Computer Components Corp., Ltd., makes silicon rectifier bridge assemblies, ex- porting some of its production to the United States. Firms that produce entirely for the domestic mar- ket include: American Electronics Laboratories (Is- rael), Ltd. (film resistors, thick-film hybrid mod- ules); Seac Israel, Ltd. (resistors and attenuators made with technical assistance from Seac of Italy); Elco Israel Electro-Mechanical Industry, Ltd. (large oil capacitors); Electro- Amin Israel, Ltd. (metalized mylar and polycarbonate fixed capacitors); S&R Zolotov (wire resistors, inductors); Elisra, Ltd. (multipin and edge connectors under license from the U.S. firm, Elco Corp); EMCI (connectors); and Taba Electronics Industry, Ltd. (rectifiers and relays, under license from Tresco Corp. of the United States). The extent to which Israeli electronics firms have found it advantageous to integrate their production vertically has been severely hampered by the lim- ited size of the domestic market and the wide va- riety of components needed by individual manufac- turers. Furthermore, basic components are usually available more cheaply from abroad. Product cate- gory components are seldom made in-house unless there is a need to incorporate some unique feature. Several of Israel's larger electronics firms have indi- cated, however, that they plan to strengthen the component side of their operations. They expect their needs for custom-made components to increase as they develop more of their own product designs and rely less on blueprints supplied by foreign li- censors. Tadiran is the most integrated firm at pres- ent; it makes most of its own inductors (trans- formers and coils) as well as a limited range of transistors and integrated circuits. The participation of major European and Jap- anese manufacturers in the Israeli market for the surveyed components is confined mainly to sales of components used in radios and television sets and in certain types of telephone equipment. Well over 65 100 American suppliers of electronic components are represented in Israel, either under exclusive agreements with local electronic firms or with dis- tributors, importers, and sales representatives. In contrast, only 45 third-country suppliers are repre- sented in this market; half of these are British and German firms. Few sales representatives find it useful to actively promote the sale of specific components. Indeed, many are totally unequipped to provide significant applications assistance. Israeli design engineers are avid readers of component manufacturers' catalogs and usually make their purchasing decisions on the basis of the information given therein. Import duties. — Customs duties on electronic components range from 10 to 60%, with the highest duties being applied to color TV tubes, mounted piezoelectric crystals, and certain types of capaci- tors. In addition, there is a 20% surcharge on all imported goods, including electronic components. Duties and the surcharge are based on the cost, in- surance, and freight (c.i.f.) value. Information on official duty rates applicable to specific items within the product category may be obtained from the U.S. Department of Commerce, Domestic and Interna- tional Business Administration, Room 4217, Main Commerce, Washington, D.C. 20230. A system of import licenses enables Israel to con- trol the outflow of foreign exchange, allocating its use according to Government-established priorities. Licenses covering the import of electronic compo- nents are usually granted promptly. Importers of goods valued at more than $1,190 are required to deposit with the Government a sum equivalent to 20% of the c.i.f. value of the mer- chandise. These deposits are returned, with interest, 6 months after the goods clear customs. Technical Requirements The electrical power supply characteristics through- out Israel are 230 volts, 50 hertz, single-phase. In addition, 380 volts, 3-phase is available for heavy- duty equipment. The metric system of weights and measures is the statutory standard in Israel. Published national standards for electronic com- ponents in Israel may be obtained through the American National Standards Institute, Inc., 1430 Broadway, New York, N.Y. 10018. The following market research study, upon which this Country Market Survey is based, is available on loan from the U.S. Department of Commerce, Domestic and International Business Administration, Room ' 1617M, Main Commerce, Washington, D.C. 20230: "The Market for Electronic Components in Israel," DIB 74-06-500, December 1973. 66 Italy Italy: Size of market for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Sales of electronic components in Italy are forecast to rise substantially during the 1970's as Italian manufacturers strive to increase their share of the rapidly expanding domestic and foreign markets for electronic end-products. The country's output of finished electronic prod- ucts is expected to nearly double from $1.6 billion in 1972 to $3 billion in 1977. The Italian market for the selected groups of electronic components covered in this sur- vey grew 52% between 1971 and 1973, climbing from $89.5 million to $135.7 million (see table 1). Purchases of these components are ex- pected to rise at an 18% average annual rate dur- ing the years just ahead, reaching over $260 mil- lion in 1977. Imports averaged over 70% of the total Italian market for product category components during the 1971-73 period. During the same period, im- ports rose an average of 25% a year, climbing from $63.4 million to $99.8 million. The import market is expected to exceed $170 million in 1977. The United States was a leading foreign supplier of product category components to Italy in 1972, with a 19.9% "share ($17.2 million) of total im- ports (see table 2). It is estimated that increasing Italian demand for advanced components will result in annual sales of over $35 million by U.S. sup- pliers in 1977. The major foreign competition to U.S. suppliers of electronic components in the Italian market comes from German, French, Dutch, and Japanese manufacturers. 1969 1973 1977 Capacitors Integrated circuits Diodes and rectifiers Transistors Resistors Color TV picture tubes Sales Opportunities Rising Italian demand for advanced electronic components, particularly by the telecommunications 64 J I I 0 10 20 30 40 50 60 70 80 90 Source U S. Department ol Commerce. Bureau ot International Commerce market survey. Product Category Definition Electronic components covered in this survey are basically confined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product category" as used in this publi- cation is limited to these six groups of components. 67 Italy — Selected Indicators (1973) Cross national product: $137.0 billion Population: 54.5 million Total country imports: $25.5 billion Imports from U.S. (w/ share of total): $2.2 billion (8.6%) Total country exports: $21.0 billion Exports to U.S. (w/ share of total): $2.0 billion..(9.5%) Exchange rate (May 1974): 625 lira US$1 and computer industries, should assure increased sales by U.S. suppliers. A market survey recently conducted in Italy for the U.S. Department of Com- merce, Office of International Marketing reveals that favorable sales opportunities exist for American exporters of the following electronic components: Capacitors. — Italy's capacitor market grew mod- erately from $30.2 million in 1971 to $36.1 mil- lion in 1973. Purchases are forecast to reach $55 million in 1977, representing a better than 11% average yearly increase over the 1973 level. The country's imports of capacitors are expected to top $28 million in 1977, up from $18.3 million in 1973 and $12.7 million in 1971. Imports of American-made capacitors amounted to nearly $2 million in 1972, representing a 12.5% share of the import market. Items in high demand include elec- trolytic capacitors and film and ceramic capacitors. Integrated circuits. — The Italian market for inte- grated circuits more than doubled from $11.8 mil- lion in 1971 to $27 million in 1973. Sales of IC's are forecast to climb at an average rate of 30% annually between 1973 and 1977, surpassing $80 million in the latter year. Imports rose from $9.5 million in 1971 to $20 million in 1973 and are expected to reach $55 mil- lion in 1977. The United States is Italy's leading supplier of integrated circuits. Its share of this import market increased from 20.5% ($2 million) in 1971 to 41.5% ($6.2 million) in 1972. Italian electronics manufacturers should continue to look to American suppliers to fill a large portion of their needs for integrated circuits, particularly the fol- lowing types: • TTL (MSI) • ECL • Digital • Linear The trend toward use of digital integrated circuits in Italian-made instrumentation and control equip- ment has been accelerated by the advent of LSI. Linear integrated circuits are being used in such control devices as operational amplifiers, D/A and A/D converters, phase-lock loop circuits, and in- terface circuits. Advanced integrated circuits will also be used more extensively in voltage regulators, display drivers, converters, and operational am- plifiers in the near future. Manufacturers of telecommunications equipment reportedly are inclined toward the use of CMOS in their new designs. They also will need fast digi- tal logic integrated circuits such as IF and audio amplifiers, voltage regulators, and other low-power devices. Olivetti Ing E&D S.p.A. (Torino), a major computer manufacturer, expects to begin using large- scale MOS as a replacement to DTL, bypassing the TTL stage entirely. Italy's most important auto- mobile producer, Fiat, plans to utilize integrated circuits in its fuel injection systems, anti-skid mechanisms, seat belt interlock systems, ignition systems, automatic transmissions, and other auto- motive systems by the end of this decade. A fur- ther boost in demand for integrated circuits should result from the anticipated growth in domestic pro- duction of color television receivers after 1974. Diodes and rectifiers. — The market for diodes and rectifiers grew 28% from $18 million in 1971 to $23 million in 1973 and should advance to $24 million in 1977. Imports in 1972 were valued at $12.5 million, of which purchases from the United States accounted for $2.6 million, or 20.8%. Power rectifiers and tunnel diodes should offer good sales potential for the next several years. The overall increase projected for electronic equipment production in Italy should ensure a growing market for rectifiers, particularly for high- power types used in heavy industrial equipment. This should offset a slackening demand for low- current diodes that are steadily being displaced by integrated circuits. Transistors. — Although the Italian market for transistors expanded from $14 million in 1971 to $20 million in 1973, a decline to $15 million is ex- pected for 1977 as integrated circuits gradually supplant transistors. Imports should follow a similar pattern. Tran- sistor imports are projected to drop to $13 million in 1977, down from $17 million in 1972 and $18 million in 1973. Despite the overall slackening in demand, the market for silicon switching/power transistors and silicon n-p-n power transistors should experience steady growth through 1977. Resistors. — Nearly all of Italy's needs for re- sistors are met by imports. The total resistor mar- ket in 1973 was valued at $17.2 million, while im- ports amounted to $19.5 million. The market should exceed $22 million in 1977, and imports are expected to top $24 million (see table 1 ). The United States in 1972 held an 18.5% share ($3.4 million) of the $1 8.2-million import market. 68 Color TV picture tubes. — Domestic production of color television sets is expected to rise appre- ciably when the Government announces the type erf transmission — either the German PAL system or the French SECAM — that will be adopted. The television industry and consumers have been await- ing this decision and the initiation of color trans- mission for a number of years, and both may occur during 1974. Based on this assumption, a 50% average an- nual increase is forecast for the Italian color TV picture tube market during the next 4 years, with sales rising from $12.4 million in 1973 to about $64 million in 1977. Imports, which climbed from $3.4 million in 1971 to $11 million in 1973, are forecast to reach $40 million in 1977. Purchases of U.S. -origin color TV picture tubes in 1972 amounted to $792,000, or 10% of the $8-mi!lion import market in that year. Other electronic components. — Among the com- ponents outside the product category for which a good growth market is emerging in Italy are light-emitting diodes (LED's) and thyristors. Pur- chases of LED's totaled $1.5 million in 1972 and are projected to reach $8 million to $10 million in 1977. LED's are now commonly used in Italian- made hand-held calculators and are gaining increas- ing acceptance in electronics generally. Demarid for thyristors also is expected to rise considerably when Italian production of color tele- vision receivers is fully underway. The thyristor market is forecast to reach about $9 million in 1977, up from the 1972 level of $3 million. Selected End-User Industries Italian production of finished electronic prod- ucts rose 17% from $1.37 billion in 1971 to $1.6 billion in 1972. Output of industrial/com- mercial equipment accounted for 75% of the 1972 total and that of consumer electronic products ac- counted for the remainder. An estimated 65% of the number of semiconductors consumed in Italy is incorporated into industrial/commercial elec- tronic equipment, while 35% is used in consumer goods. The industrial/commercial equipment sector of Italy's electronics industry should continue to be the country's most important market for components. The Government's efforts to expand and upgrade telecommunications networks will result in a sig- nificant demand for advanced electronic compo- nents. A rapid rise in demand for a broad range of advanced components is also expected in the com- puter and automotive industries during the 1970's. Government support for Italian industry is pro- vided by the Institute for Industrial Reconstruc- tion (IRI). Through the IRI, the Government either Italy — The Electronics Industry Basic Data (1972) Total value of production: $1.8 billion Number of manufacturers (1971): 1,300 Industry labor force: 77,500 | Output of principal electronic components user industries — Consumer products industries: television sets $233 million Industrial / commercial equipment industries: computers and related equipment $223 million 1 telecommunications equipment $766 million measuring and testing instruments $65 million medical electronic equipment $41 million owns or has a controlling interest in a number of the country's industrial concerns, including radio and television, computer, and telecommunications companies. Public investment in the telecommuni- cations industry during the 1973-77 period is ex- pected to total $5.6 billion. In addition, the Gov- ernment plans to spend $235 million during the same period in an effort to help improve the effi- ciency and profitability of the country's computer and electronic components industries. Industrial/ commercial equipment sector. — Italian production of industrial/commercial electronic equipment amounted to nearly $1.2 billion in 1972 and is expected to nearly double to $2.3 billion in 1977. The sector has a workforce of some 50,000 people. Telecommunications equipment. — Italian output of telecommunications equipment was valued at $548 million in 1972, representing a sharp increase from production levels of $303 million in 1970 and $260 million in 1968. Production of exchange and switching equipment accounted for 70% ($384 million) of the 1972 total. By 1977, annual output of telecommunications equipment should exceed $1 billion, most of which will be consumed locally. Increased demand for telephone service in Italy has been the most important factor spurring the industry's output. The Societa Italiana per 1'Eser- cizio Telefonico (SIP), the national telephone com- pany, invested $460 million in new equipment in 1972, resulting in a more than 9% increase in sub- scribers over the previous year's figure. At the end of 1972, Italy had a total of 7.6 million tele- phone subscribers with 11.3 million telephones in- stalled. Italy's telephone density in that year was 69 Table I . — Italy: Size of market ' for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Description 1969 1971 1972 1973 1974 1977 Resistors Production' 4.3 3.4 2.7 2.0 2.0 1.6 Imports 15.5 13.7 18.2 19.5 20.9 24.2 Exports 4.9 3.6 5.1 4.3 4.0 3.5 Market size 149 13.5 15.8 17.2 18.9 22.3 Capacitors Production2 26.4 35.3 37.8 42.7 47.4 62.3 Imports 11.4 12.7 15.8 18.3 20.9 28.1 Exports 13.9 17.8 22.3 24.9 27.1 35.4 Market size 23.9 30.2 31.3 36.1 41.2 55.0 Color TV picture tubes Production2 — 3.8 20.2 42.8 63.7 123.7 Imports — 3.4 8.0 11.0 20.0 40.0 Exports 5.2 20.0 41.4 50.0 100.0 Market size 2.0 8.2 12.4 33.7 63.7 Diodes and rectifiers Production2 11.9 12.8 16.0 18.0 20.0 24.0 Imports 12.8 12.1 12.5 13.0 11.5 10.0 Exports 6.7 6.9 7.6 8.0 8.5 10.0 Market size 18.0 18.0 20.9 23.0 23.0 24.0 Transistors Production2 13.8 21.7 23.0 24.0 25.0 22.0 Imports 16.8 12.0 17.0 18.0 17.0 13.0 Exports 15.6 19.7 21.4 22.0 23.0 20.0 Market size 15.0 14.0 18.6 20.0 19.0 15.0 Integrated circuits Production2 3.8 9.5 18.3 25.0 37.0 60.0 Imports 8.1 9.5 14.9 20.0 27.0 55.0 Exports 5.5 7.2 13.2 18.0 27.0 34.0 Market size 6.4 11.8 20.0 27.0 37.0 81.0 Total* Production2 60.2 86.5 118.0 154.5 195.1 293.6 Imports 64.6 63.4 86.4 99.8 117.3 170.3 Exports 46.6 60.4 89.6 118.6 139.6 202.9 Market size 78.2 89.5 114.8 135.7 172.8 261.0 1 Sue of markei equals production plus imports minus exports. Paris and accessories not included. - Production figures for 1469-7.1 include components manufactured by OEM's for their own use. In-house production of resistors represents 5'/, of the total; capacitors, 15%; color TV picture tubes, 85%; diodes and rectifiers. 30%; transistors, 25$; and integrated circuits, 30%. Insignificant. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. 20.8 telephones per 100 inhabitants, more than double the 1962 ratio. SIP's investment in new equipment in 1973 was estimated at $1 billion. SIP is gradually switching over to pulse code modulation ( PCM ) circuits for short-distance trans- mission. Although electronic transmission is be- coming standard in Italy, electronic switching is being used only on an experimental basis. A change to fully electronic systems is probable in the next few years. Virtually all of SIP's purchases are made through six major companies. They are Societa Italiana Fclecommunicazione Siemens S.p.A., a subsidiary of Siemens AG; FACE Standard, a subsidiary of ITT; GTE Telecommunicazioni S.p.A., a subsidiary of GT&E; Telettra S.p.A. ( Milan), a private Italian- owned firm; and Fabbrica Apparechiaturc Tcle- foniche e Materiale Elettrica Brevetti Ericsson (FATME); and Impianti Elettrici e Telefonici Sis- tema Ericsson (SIELTE), both subsidiaries of L. M. Ericsson. SIP and its principal suppliers buy elec- tronic equipment and components from the United States when comparable devices are not available locally. Both Siemens and Telettra, for example, recently placed orders for American-made com- puter-controlled electronic circuit testers. The grad- ual changeover to electronic circuitry in Italy's telephone system should result in increased oppor- tunities for sales of advanced electronic components by U.S. suppliers. Computers and related equipment. — Italy's out- put of computers and related equipment was valued at more than $223 million in 1972, a 22% jump over the 1971 level of $183 million. Of the 1972 70 total, output of computers amounted to $154.6 Consumer products sector. — The Italian con- million, while that of peripherals was valued at sumer electronics sector, with approximately 14,700 $68.7 million. The industry's total production is employees, recorded a nearly 13% increase in out- expected to rise at an annual rate of between 20 put from 1971 ($350 million) to 1972 ($395 mil- and 25%, reaching nearly $600 million in 1977. lion). The projected 1977 production level is $700 Olivetti launched the Italian computer industry million. in the 1950's. However, General Electric, under an Television receivers.— Television receiver manu- agreement with Olivetti, took over the latter com- facturing is by far the largest industry within the pany's production. The GE establishment, now a consumer products sector, accounting for nearly Honeywell subsidiary known as Honeywell Infor- 6o% 0f the sector's total output in 1972. The mation Systems Italia S.p.A., consists of a plant commencement of color TV transmission in Italy at Caluso and a research center at Pregnana. Oli- should result in a boom period for the country's vetti, in Turin, recently reentered the computer television set producers. Large-scale manufacture field with its Series P600 business computers. IBM has been delayed in anticipation of the Govern- also has an Italian manufacturing subsidiary, known ment's decision on the type of transmission to be as IBM Italia S.p.A., which started production in adopted. A few Italian manufacturers, encouraged 1966 and manufactures the 360/20, 360/22, by the strong foreign market for color sets and by 370/125, and Systems/3 in its Vimercate plant. their hopes for an early decision on domestic trans- Two large organizations control the other domes- mission, started to produce PAL sets in 1970. tic computer companies. The first is under the aus- Northern Italy already has a small market for color pices of the Government agency Societa Finanzi- TV sets because Swiss, French, and Yugoslav sta- oria Telefonica (STET), which forms one branch tions can be reccived. Production of color sets of the Institute for Industrial Reconstruction (IRI). doubled from 50,000 units in 1971 to 100,000 in Three firms, Selenia-Industrie Elettronieh Associate 1972 and is expected to reach 850,000 in 1977, S.p.A., Pignone Sud S.p.A., and Elettronica San assuming Italian color transmission begins in 1974. Giorgio, are controlled by the STET but operate Domestic production of black-and-white sets is independently of each other. The latter two firms projected to decline from 1.9 million units in 1973 manufacture minicomputers, and Selenia produces t0 900,000 in 1977. The trend in monochrome re- process control computers and telecommunications cciver production is away from the large sets toward equipment. The second group is part of the Monte- portable TV's; about 45% of 1973 output repre- catini-Edison complex and includes LABEN in sented |arse-screen models while 55% was corn- Milan, Industria Macchine Elettroniche (IME) in posed of Smaller models. The new designs for Rome, and Officine Transformotori Elettrici (OTE) monochrome televisions include four or five inte- in Florence. IME manufactures desk calculators, grated circuits in each set. minicomputers, and input/output devices. LABEN The National Association of Electronic Indus- and OTE both make minicomputers. tries (ANIE). in Italy has requested the Govern- Communications equipment. — Production of ment to initiate broadcasting with a third black-and- communications equipment in 1972 totaled $218 white channel and to adopt cable TV. These meas- million, more than double the 1970 level of $99.6 ures, if implemented, would have a salutary effect million. Production of radio communications equip- on television receiver sales. ment in 1972 was valued at $65 million; public The major manufacturers of TV sets in Italy broadcasting equipment, $54 million; and radar are Philips, CGE Telefunken, Zanussi A Industrie and navigational aids, $98 million. S.p.A., Grundig-Minerva, Phonola, Autovox S.p.A., Table 2. — Italy: Imports from the United States, and U.S. share of total imports, of selected groups of electronic components. 1969-72 ' (in thousands of U.S. dollars) 1969 1971 1972 U.S. share U.S. share U.S. share Description Value (percent) Value (percent) Value (percent) Resistors 3,391 21.9 2,950 21.5 3,374 18.5 Capacitors 2,216 19.4 2,045 16.1 1,972 12.5 Color TV picture tubes n.a. — n.a. — 892 9.9 Diodes and rectifiers 4,293 33.5 2,766 22.9 2,600 20.8 Transistors 7,520 44.8 2,906 24.2 2,244 13.2 Integrated circuits 4,769 58.9 1,944 20.5 6,186 41.5 Total 22,189 34.3 12,611 19.9 17,168 19.9 1 Paris and accessories not included. Source: U S. Department of Commerce, Bureau of International Commerce market survey. 71 and Voxon S.p.A. A number of these firms are as- sociated with large foreign companies. Phonola is a subsidiary of Philips, and Autovox is now part of Motorola. AEG-Telefunken presently holds 25% of Zanussi stock, while EMI owns 50% of Voxon. The Competitive Environment Italian production of the electronic components under review amounted to SI 54.5 million in 1973 and is expected to approach $295 million in 1977. Annual exports are projected to climb from $118.6 million to more than $200 million during the same period. A total of 12,750 people are employed by over 40 firms in Italy's electronic components in- dustry. The major strengths of the domestic industry lie in the production of capacitors, color TV pic- ture tubes and, increasingly, integrated circuits. The most significant producers of capacitors in the coun- try are Ducati Elettrotecnica Mi-Crofarad S.p.A., Fabbrica Componenti Elettrici (FA.C.EL srl), In- dustrica Condensatori Ap'plicazioni Elettroniche (ICAR), MIAL S.p.A., Plessey ARCO S.p.A., and Procond S.p.A. Most of the color TV picture tubes manufactured in Italy to date have been exported, due to the lack of local color television transmission. The high proportion of tubes exported to France— about 67% — is primarily accounted for by the fact that Italy's major producer, Videocolor S.p.A., is con- trolled by the French concern Thomson-CSF. Italy's two major manufacturers of integrated circuits are General Instrument Europe S.p.A. and SGS-ATES Componenti Elettronici S.p.A. The lat- ter company, with plants at Agrate and Catania, was formed as the result of a merger between So- cieta General Semiconducttori S.p.A. (SGS) and Aziende Tecniche Elettroniche del Sud (ATES). The Government holds a 60% share of the com- bined company, while Fiat and Olivetti each hold 20%. SGS-ATES, under licensing arrangements with the U.S. companies Fairchild and RCA, produces a wide variety of components, ranging from dis- crete semiconductors to bipolar digital and comple- mentary MOS integrated circuits. The firm is par- ticularly strong in linear integrated circuits for con- sumer applications, which account for 30% of sales. SGS-ATES planned to invest $15.7 million on expanded production and research facilities in order to raise output by 50% in 1974. General Instrument, based in Naples, manufactures a num- ber of semiconductor "devices, but its integrated cir- cuit production is devoted entirely to MOS. Italy is a net exporter of transistors, with about 80% of the exports destined for Germany, France, the Netherlands, and the United Kingdom. MIS- TRAL S.p.A., SGS-ATES, and Texas Instruments Italia S.p.A are the major transistor producers in the country. These firms also manufacture diodes and rectifiers along with a number of other com- panies, such as Ansaldo San Giorgio Compagnie Generale (ASGEN), International Rectifier, Tecno- masio ltaliano Brown-Boveri S.p.A., and Tumgsram S.p.A. U.S. -made components highly regarded. — Italian firms view the United States as the prime source for sophisticated semiconductor devices. American com- panies therefore are likely to remain the country's leading suppliers of advanced componentry, particu- larly integrated circuits, for the foreseeable future. Among the American companies exporting com- ponents to Italy are Beckman Instruments, Inc.; Elco Corporation; ITT Cannon Electric Division; Motorola Semiconductor Products, Inc.; National Semiconductor Corporation; and Westinghouse Elec- tric Corporation. Germany is another important supplier of elec- tronic components to Italy, accounting for 25.1% of the country's import market for integrated cir- cuits in 1972 and over 30% of the import market for transistors. Alois Zettler GmbH, Dr. Bernhard Bcyschlag, Ernst Roederstein GmbH, Siemens AG, and Suhner Elektronik GmbH are among the lead- ing German exporters to Italy. Major French sup- pliers include Cogeco S.A., B. Precis S.A., Radiall S.A., Silec Semiconductors, Socapex S.A., and Sov- cor Electronique S.A. British companies active in the market include AEI Semiconductors, Ltd.; Bell- ing & Lee, .Ltd.; Plessey Co., Ltd.; and Westing- house Brake & Signal Co. The Dutch company Philips N.V., the Swedish firm Rifa A.B., and the Japanese concern Omron Tateisi Electronics Co. also have made successful inroads in the Italian electronic components market. Import duties. — Italy is a member of the Euro- pean Economic Community (EEC) and applies the Common External Tariff (CXT) to all goods im- ported from non-EEC countries. The CXT rate of duty, applied to the cost, insurance, and freight (c.i.f. ) value of imports, ranges from 6.5% on switches, relays, and connectors to 17% on micro- circuit semiconducor devices. Italy also assesses a value-added tax (TVA) of 12% on the c.i.f. duty- paid value on imported components. TVA applies to all manufactured products, including those made in Italy. In addition, a new tariff adopted by EEC and European Free Trade Association (EFTA) coun- tries provides that both organizations will assess full duties against any product shipped from one Euro- pean trade-group nation to another if 41% of the value of the product was made outside the EEC or EFTA or if more than 3% of its value included transistors made outside either group. Information on official duty rates applicable to specific types of components within the product category may be obtained from the U.S. Department 72 of Commerce, Domestic and International Business Administration, Room 4217, Main Commerce, Washington, DC. 20230. Technical Requirements Italy's electrical power supply characteristics arc 220/380 volts, single- or 3-phase, 50 hertz. The metric system of weights and measures is the statutory standard in Italy. Published national standards for electronic com- ponents in Italy may be obtained through the Amer- ican National Standards Institute, Inc., 1430 Broad- way, New York, N.Y. 10018. The following market research study, upon which this Country Market Survey is based, is available on loan from the U.S. Department of Commerce, Do- mestic and International Business Administration, Room 1617M, Main Commerce, Washington, D.C. 20230: "The Market for Electronic Components in Italy," DIB 74-06-503, November 1973. 73 Japan Japan: Size of market for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Japan offers American exporters of electronic components an excellent market for their products. The 1973 market for the components covered in this survey exceeded $2.4 billion, an increase of 88% over 1971 sales of $1.3 billion (see table 1). Growth in demand for these components is assured by several factors affecting the Jap- anese electronics industry — the increasing demand for industrial control equipment, display devices, and electronic meters; the expected growth of the computer industry; and the continu- ing expansion of desk-top and pocket calculator pro- duction. Japanese industry sources predict that sales of components in the product category will climb at an average annual rate of almost 1 1 % between 1973 and 1977, reaching more than $3.6 billion. Japanese imports of the components under re- view have been increasing rapidly, rising an aver- age of 33% annually between 1971 and 1973. Growth of imports during the 1973-77 period is expected to average 42% annually. Imports totaled $167 million in 1973, representing 7% of the mar- ket. Forecasts indicate that imports should reach over $680 million in 1977, supplying about 20% of Japan's requirements. The United States is the principal supplier of product category components to Japan. Although imports of these components from the United States rose from $43 million in 1969 to $47.7 million in 1972, the U.S. share of the import market declined from 80.3 to 57.1% during the same period (see table 2). This decline reflected an increase in im- ports of components from both U.S. and Japanese subsidiaries in Korea and other Southeast Asian coun- tries. Components imported from these developing Color TV picture tubes Capacitors Integrated circuits Transistors 1969 1973 1977 life 492 Resistors Diodes and rectifiers j L J L 10(1 600 900 1.200 1,500 Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Product Category Definition Electronic components covered in this survey are basically confined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product category" as used in this pub- lication is limited to these six groups of components. 74 Japan — Selected Indicators 1973 Gross national product (est.): $407.9 billion Population: 108,700,000 Total country imports: $38.3 billion Imports from U.S. (w/share of total): $9.3 billion (24.2%) Total country exports: $36.9 billion Exports to U.S. (w/share of total): $9.5 billion (25.6%) Exchange rate (May 1974): 278 yen=US$l countries, however, are primarily the lower cost, less sophisticated devices. Japan still looks to the United States for advanced products. The expected rise in Japanese production of in- dustrial electronic equipment, which will require larger quantities of more sophisticated components, should lead to an increase in the U.S. share of the country's component imports. Trade sources pre- dict that by 1977 the United States will hold 60 to 75% of the Japanese import market for electronic components within the product category. Sales Opportunities U.S. electronic components producers will find excellent sales opportunities in Japan for many of their more advanced products since the Japanese trail the Americans in the development and mass production of new technology components. Jap- anese manufacturers of electronic finished goods rapidly incorporate newly developed U.S. -made com- ponents into their products to maintain their high competitive position in the world market. A market research survey recently conducted in Japan for the U.S. Department of Commerce, Office of International Marketing, reveals that favorable sales opportunities exist for American exporters of the following electronic components: Color TV picture tubes. — The market for im- ported color TV picture tubes in Japan has been small— only $300,000 in 1973— but it is expected to grow rapidly. Imports are predicted to rise at an average annual rate of 75% during the next 4 years, reaching $2.8 million in 1977. The highest growth is expected in imports of color CRT's for industrial use or for display devices for computers. Purchases of imported CRT's for color TV's should increase at a slower rate, although Japanese demand for color television is still active. Domestic production of color TV tubes increased 41% between 1972 and 1973, climbing from $397 million to $560 million. Capacitors. — Japanese capacitor purchases to- taled $239 million in 1971 and reached $492.9 million in 1973, representing an average rise of 44% each year. Although demand for some types of capacitors will diminish as they are displaced by IC's, the market should rise about 1 1 % annually between 1973 and 1977, advancing to $739 million. Imports are expected to grow faster than the total market during this period, increasing at an average rate of 21% annually. They should exceed $25 million in 1977. The United States held 26.2% of the import market in 1972 despite increased im- ports of capacitors from Japanese subsidiaries in Southeast Asia. U.S. manufacturers can expect to continue as a major source of special high-quality capacitors for the Japanese electronics industry. Demand is in- creasing rapidly for multilayer ceramic chip capaci- tors for use in hybrid IC's. The 1973 market for ceramic capacitors reached $117 million, nearly double the 1971 level of $59 million. Industry sources expect sales of multilayer ceramic capaci- tors to increase an average of 30% annually during the next 4 years. Integrated circuits. — The Japanese market for IC's totaled $208.4 million in 1971 and then rose an average of 55% annually to reach $492 million in 1973. Sales are expected to grow at an average rate of 32% annually during the next 4 years. They should approach $1.5 billion in 1977 as IC's con- tinue to displace transistors, capacitors, and resis- tors in Japanese electronic products. The rising demand for IC's for computers, calcu- lators, and other electronic end products cannot be met locally, and the market share supplied by im- ports is expected to increase from 32% in 1971 to 40% in 1977. Purchases of American-made IC's totaled $29 million in 1972, accounting for 59.2% of the import market. U.S. manufacturers are the major source of MOS-LSI's and MOS memories used in Japanese computers and calculators. C/MOS integrated circuits for display drives, meters, and gauges, are expected to be in great de- mand in the near future. One of the principal uses of C/MOS devices in Japan will be for wrist- watches. Production of electronic watches in Japan began in the summer of 1972, and 2.5 million were manufactured in 1973. By 1978, the industry expects 40% of all wristwatches made in Japan to be electronic. Resistors. — Demand for reliable, high-quality re- sistors is expected to multiply as the electronics industry in Japan shifts emphasis on output from consumer to industrial products. These more ad- vanced resistors are supplied mainly by U.S. manu- facturers, as evidenced by the high value per unit of resistors imported into Japan from the United States. 75 For example, the average value per unit of im- ported variable resistors in 1972 was 17 cents, while the average value per unit of such resistors im- ported from the United States was $4.05. Similarly, the average value of imported fixed resistors was $4 per kilogram in 1972, compared to $38.00 per kilogram for resistors purchased from U.S. firms. The growth in Japanese production of electronic consumer goods, especially TV sets and radios, al- ready has created a substantial market for resistors. Sales rose front $158.9 million in 1971 to $289.7 million in 1973, representing an average yearly growth rate of 35%. The trend toward wider use of IC's in consumer products is expected to reduce the growth rate to about 9% annually' during the 1973-77 period. Imports of resistors, however, are forecast to increase by 24% annually through this period, with purchases of foreign-made resistors expected to exceed $24 million in 1977. The United States is the major source of these imports, supplying 61.8% ($3.7 million) of the S6 million import market in 1972. The best sales opportunities for U.S. producers will be found in wirewound and metal film resistors. The market for wirewound resistors, used mostly in industrial equipment, grew from $10 million in 1971 to $22 million in 1973. Sales of metal film resistors more than doubled, from $7 million to $15 million, during the same period. The color TV re- ceiver, computer, audio, and avionics equipment industries are expected to use increasing numbers of metal film resistors. Transistors. — American transistor manufacturers should find good sales opportunities in Japan despite the expected decline in the transistor market arising from the shift to IC's. Demand should continue to be strong for specialized high-technology devices developed in the United States, particularly for transistors with high-frequency, high-power, low- noise, and high-power field effect. The overall transistor market in Japan rose from $236 million in 1971 to $381.6 million in 1973, an average annual increase of 27%. However, sales are projected to decline about 6 to 7% annually be- tween 1973 and 1977. Imports of all types of transistors grew at an average rate of 35% annually, going from $11 million in 1971 to $20 million in 1973, but are expected to decline to $15 million in 1977. U.S. manufacturers supplied 54.5% of 1972 imports and should continue to dominate the import market as the demand for transistors narrows to higher tech- nology components. Other electronic components. — In addition to the six component groups surveyed, good sales oppor- tunities will be found in Japan for U.S. producers of the following electronic components: Japan — The Electronics Industry Basic Data (1972) Total value of production: $11.9 billion Number of manufacturers (1969): 11,193 Industry labor force (1969): 804,976 Output of principal electronic components user industries — Consumer products industries: radios $411 million television receivers $2.5 billion audio equipment $1.7 billion calculators $355 million Industrial/commercial equipment industries: computers and related equipment $1.3 billion telecommunications equip- ment $1.4 billion measuring and testing instruments $208 million industrial equipment $219 million • Printed circuit connectors • Thyristors • Yaristors • Thermistors • Light emitting diodes • Liquid crystal The market for printed circuit connectors will expand with growing use of IC's and LSI's. Also, as the emphasis in the Japanese electronics in- dustry shifts from consumer products to industrial equipment, demand should increase for connectors to be used in communications equipment, com- puters, and medical electronic equipment. Nippon Telephone and Telegraph Corporation (NTT) started to use connectors in 1966 for its push-button telephones and has converted to switch- boards requiring a large volume of connectors. Jap- anese producers are only familiar with coaxial con- nectors and must depend on licensing agreements for the production of new technology connectors, leaving U.S. suppliers with a good potential market for PC and other high-quality connectors. Japanese component manufacturers are reluctant to commercialize new technology items until they are assured of a steady future demand. The Japanese electronics industry therefore must rely on imports for such items as advanced thyristors, varistors, and thermistors. LED's will be in increasing demand over the next few years for ammeters, volt and automotive meters, and other equipment with numerical displays. In- dustry sources predict that by 1975 LED's will be used in 50% of all Japanese pocket calculators. 76 Table 1. — Japan: Size of market' for selected groups of electronic components, 1971-77 (quantity in millions of units; value in millions of U.S. dollars) 1971 1972 1973 1977 Description Quantity Value Quantity Value Quantity Value Quantity Value Resistors Production-' 12,104 176.8 13,834 227.3 17,147 341.7 24,800 488.7 Imports 210 4.5 276 6.0 414 10.6 977 24.5 Exports 2,366 22.4 3,211 34.4 5,474 62.6 9,700 105.7 Market size 9,948 158.9 10,899 198.9 12,087 289.7 16,077 407.5 Capacitors Production1 10,532 275.6 13,683 371.7 16,741 583.8 25,000 867.9 Imports 163 5.0 216 7.1 282 11.7 600 25.3 Exports 2,007 41.6 3,083 61.6 4,018 102.6 6,300 154.7 Market size 8,688 239.0 10,816 317.2 13,005 492.9 19,300 738.5 Color TV picture tubes Production : 8 310.3 10 397.1 11 560.4 12 543.4 Imports — — — .1 — .3 — 2.8 Exports — 10.9 1 27.1 1 51.7 3 152.8 Market size 8 299.4 9 370.1 10 509.0 9 393.4 Diodes and rectifiers Production : 1,396 139.1 2,062 176.5 2,162 249.6 2,780 294.3 Imports 103 7.5 139 8.3 133 11.6 135 12.5 Exports 137 7.6 189 7.7 218 10.8 207 12.1 Market size 1,362 139.0 2,012 177.1 2,077 250.4 2,708 294.7 Transistors Production- 1,638 240.5 2,175 296.2 2,310 396.8 2,000 301.9 Imports 106 11.0 148 12.8 190 20.0 150 15.1 Exports 168 15.5 281 24.2 313 35.2 280 22.6 Market size 1,576 236.0 2,042 284.8 2,187 381.6 1,870 294.4 Integrated circuits Production' 130 141.2 205 216.3 283 384.5 799 904.5 Imports 22 67.2 39 49.2 105 113.2 533 603.8 Exports — — 5 5.4 4 5.7 20 22.6 Market size 152 208.4 239 260.1 384 492.0 1,312 1,485.7 Totals Production1 25,808 1,283.5 31.969 1,685.1 38,654 2,516.8 55,391 3,400.7 Imports 604 95.2 818 83.5 1,124 167.4 2,395 684.0 Exports 4,678 98.0 6,770 160.4 10,028 268.6 16,510 470.5 Market size 21,734 1,280.7 26,017 1,608.2 29,750 2,415.6 41,276 3,614.2 1 Size of market equals production plus imports minus exports. Parts and accessories not included. - Production figures for 1971-73 include components manufactured by OEM's for their own use. In-house production of resistors represents about 10 to \5C/, of the total; capacitors, 6C/, ; color TV picture tubes, 90',,; diodes and rectifiers, 60'/ 1 transistors, 9091 ; and integrated circuits, 88%. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. However, the Japanese expect liquid crystal to re- place LED's in most applications by 1980. Seiko (Seikosha and Co., Ltd., Tokyo) digital watches with liquid crystal displays were scheduled to be introduced in the first half of 1974'. Sharp Co., Ltd., of Osaka, produces a calculator using liquid crystal, and Matsushita Electric Trading Co., Ltd., of Tokyo, is about to market a liquid crystal clock. The development of display devices for industrial use built around liquid crystals is expected in the near future. Selected End-User Industries Japanese production of finished electronic prod- ucts totaled $8.5 billion in 1972. The consumer products sector accounted for 60% of the output ($5.1 billion) and the industrial/commercial equip- ment sector accounted for 40% ($3.4 billion). Total output is expected to expand at an average rate of 14% annually between 1972 and 1977, reaching $16.6 billion. Trade sources predict that consumer goods will account for 45% of output in 1977, while industrial/commercial products will represent 55%. The Japan Electronics Machinery Manufacturers Association (JEMMA) estimates that 1.6% of indus- trial production of electronic equipment in 1970 and 2% in 1972 was for military use. Output of military goods grew at an average annual rate of about 6% between 1969 and 1972, but against a small base. 77 Legislation enacted in 1971 by the Japanese billion in 1975, an average increase of more than Government is aimed largely at helping the Jap- 50% per year from the 1972 level, anese electronics industry close the gap between Japan's computer manufacturing industry is U.S. and Japanese technological levels. The law heavily supported by the government through quan- incorporates a series of technological goals devised titative restrictions and tariffs on imports of EDP to stimulate the growth of industrial (chiefly com- and related equipment, restraints on investment puter-related) electronic products. of foreign capital, and direct technical assistance. The 1971 legislation included a budget suggest- A project concerning the development of ultra- ing that government and industry together should high performance computers was started in 1966 spend $1.4 billion on R&D between 1971 and and was fully financed (for $133 million) through 1977, with 67% of the funds assigned to the devel- the Agency of Science and Technology of the opment of computers, 10% for electronic compo- Ministry of International Trade and Industry nents, 8% for communications equipment (includ- (MITI). As a result of the project, a prototype ing optoelectronics), and 5% for electronic equip- machine with eight megabyte was produced in ment for aviation and space applications. 1971, employing LSI and pipeline control tech- Industrial/ commercial equipment sector. — Pro- niques. duction in the industrial/commercial equipment sec- Current research efforts include an 8-year project tor increased at an average annual rate of 21% to develop a pattern information processing sys- between 1969 and 1972. Trade sources estimate tern capable of recognizing and processing written that output by this sector will increase 22% an- characters, designs and figures, objects, and voices, nually between 1972 and 1977, leading to a yearly A pilot model capable of character, figure, object, production level of $9.1 billion. Production of the and voice recognition is targeted for 1974-76, and telecommunications equipment industry, the largest a complete system is envisioned by 1978. Nearly subsector, rose at an average annual rate of 16.5% $116 million has been budgeted for this effort, between 1969 ($897 million) and 1972 ($1.4 The Japanese Government in 1972 announced billion). a new 5-year plan of financial support to the do- The entire sector in 1969 employed nearly 200,- mestic computer industry, with major emphasis on 000 workers in more than 2,000 firms. Capital research and development of "3.75 generation" corn- investment in plant and equipment in 1973 totaled puters, including peripheral equipment and soft- Si 84.5 million, more than 90% higher than in ware tnat would be competitive with advanced sys- 1972. The- largest investment is taking place in tems macje in the United States, the computer industry. Japan's national budget for fiscal 1973 included Computers and related equipment. — The fastest $130 million for R&D subsidies in electronics and growing industry within the industrial/commercial related fields. Developers of large-capacity corn- equipment sector, in terms of production as well puters received 35% of the allocations, while 39% as capital investment, is the computer and related went to the Government-supported "Japan Elec- equipment industry. Nearly 500 companies, with tronic Computer Co. (JECC) to promote the use 54,000 employees, produced computers and related of large-capacity computers on a time-sharing and equipment valued at $544 million in 1969 (see lease basis. Projects related to data transmission, table 3). Production rose an average of 32% yearly including facsimile and visual display transmission, to nearly $1.3 billion in 1972. JEMMA estimates received 18%, while lesser allocations were pro- that the computer industry's output will reach $4.5 vided for the improvement of data processing and Table 2. — Japan: Imports from the United States, and U.S. share (by value) of total imports, of selected groups of electronic components, 1969-71 ' (quantity in thousands of units; value in thousands of U.S. dollars) 1969 1971 1972 n . . U.S. share U.S. share U.S. share uescnption Quantity Value (percent) Quantity Value (percent) Quantity Value (percent) Resistors' n.a. 2,941 91.0 17,446 3,305 73.5 19,419 3,700 61.8 Capacitors1' 26,845 1,650 44.5 18,131 1,800 36.2 18,942 1,859 26,2 Color TV picture tubes I 150 85.7 — 41 87.2 — 83 92.2 Diodes and rectifiers 112.296 7,286 81.9 54.811 5.986 80.0 59,138 5,925 71.2 Transistors 35,749 11,172 70.5 19,855 6.475 59.1 20,109 6,976 54.5 Integrated circuits 14,615 19,802 91.2 13,554 56,611 84.2 13,416 29,125 59.2 Total — 43,001 80.3 123,797 74,218 78.0 131,024 47,668 57.1 ' Parts and accessories not included. - Quantity in kilograms. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. 78 transmission within government agencies and in small and medium-scale companies. The JECC, which is owned jointly by the six major Japanese mainframe producers, was formed in 1961 to establish a system of computer rental that would enable more industries to automate their data processing operations. The company is the beneficiary of loans from the Japan Develop- ment Bank at a subsidized rate of 7.5%, which enables it to extend favorable rental terms to EDP users. JECC also may dictate a maximum allowable value for foreign electronic components to be in- cluded in the computer systems it buys if similar components are available from local manufacturers. Future growth of the Japanese computer in- dustry seems assured. The government expects to continue to support the industry. The JECC is in- creasing the funds available for rental of com- puters within Japanese industry and also is initiat- ing an overseas rental plan for Japanese computers. Plans by the major computer manufacturers to increase software production also should stimulate computer sales by broadening the range of possible applications. In view of the expected future market growth, computer manufacturers are enlarging their facilities. Capital investment in plant and equip- ment by the Japanese computer industry in 1973 reached $85.3 million, nearly double the 1972 out- lay of $44 million. Eight manufacturers dominate the Japanese computer industry, supplying more than 93% of the domestic market. These include six wholly- owned Japanese firms; one U.S. subsidiary, IBM Japan, Ltd.; and one U.S. -Japan joint venture company, Oki-Univac Co., Ltd., owned by Oki Electric Industry Co., Ltd., and Sperry Rand Corp. Their respective shares of the Japanese computer market are as follows: 1972 1973 IBM Japan, Ltd 28.2 29.8 Fujitsu Co., Ltd 16.2 18.0 Nippon Electric Corp. (NEC) 16.7 14.4 Hitachi, Ltd 12.5 13.6 Oki-Univac Co., Ltd 9.8 9.1 Tokyo Shibaura Electric Co., Ltd. (Toshiba) 4.1 3.6 Oki Electric Industry Co., Ltd 4.0 3.3 Mitsubishi Electric Corp 1.6 1.4 93.1 93.2 Fujitsu is the only manufacturer in Japan to design a computer without relying on foreign tech- nology. The other producers developed their com- puters and related machinery through licensing agreements with U.S. firms, particularly Honey- well Information Systems, General Electric, Sperry Rand, Westinghouse, Xerox Data Systems, and RCA. All of the Japanese computer producers entered into technical licensing agreements with overseas computer manufacturers between 1960 Table 3. — Value of production of the Japanese com- puter and related equipment industry by type of equipment, 1969-72 (in millions of U.S. dollars) 1969 1971 1972 Analog computers 4.3 5.8 5.7 Digital computers 474.0 864.3 1,144.2 Computer peripheral equipment 16.5 28.4 37.9 Other related equipment .. 49.6 63.4 71.7 Total 544.4 961.9 1,259.5 Source: U.S. Department of Commerce, Bureau of International Commerce market survey. and 1964. By 1972, they had concluded 86 such contracts, 75 of them with U.S. firms. Fujitsu now uses IC's in all its computer cir- cuitry, while Hitachi and other makers will re- place magnetic core elements with IC's on a model- by-model basis over the next 2 years. Multilayer ceramic capacitors are being used for hybrid IC's in computers, and liquid crystals are expected to become important in the near future for character displays. The three major manufacturers, Fujitsu, NEC, and Hitachi, plan to escalate their foreign sales and expect to increase plant capacity to meet their international sales goals. Fujitsu and Hitachi ex- pect to continue their dominance of the main- frame market, while NEC will specialize in com- puter-related communications equipment. Other manufacturers are expected to cut back severely on CPU production and specialize in terminal and peripheral equipment. Industry sources expect investment for the pro- duction of hardware systems to remain steady over the next 5 years. The rising demand for software is expected to lead thereafter to a shift in investments to software production. Fujitsu plans to spend $20.4 million for a new factory at Nu- mazu (Shizuoka Prefecture) for computer pro- duction, and is purchasing land for another plant in Tochigi Prefecture to produce other electronic products. Capital investments in 1974 by the three major computer manufacturers are expected to approxi- mate $50 million for Fujitsu, $35 million for NEC, and $20 to $30 million for computer-related investments by Hitachi. Hitachi expects its invest- ments to rise 20 to 30% annually between 1973 and 1975. The level of vertical integration in the Japanese computer industry is high when compared to in- dustrial counterparts in the United States. In most cases, the top six computer manufacturers obtain components from their own subsidiary producers or from smaller component manufacturers affiliated through banking relationships. The major excep- tion is in the field of sophistiated components. 79 such as computer memory IC's, which are im- ported. Consumer products sector. — Japan had more than 3,000 firms with a total of about 270,000 em- ployees producing consumer electronic goods in 1972. Total output reached $5.1 billion in 1972 and is predicted to exceed $7.5 billion in 1977. Capital investments by the consumer electronic prod- ucts manufacturers in 1973 climbed to nearly $150 million, more than double the 1972 outlay of $73.6 million. TV receivers accounted for $2.5 billion, or 29% of Japan's 1972 total output of electronic end prod- ucts, and tape recorders represented $916 million, or 1 1 % of the total. High growth rates were ex- hibited in the output of FM tuners, which grew an average 39% annually between 1969 and 1972, and hi-fi amplifiers, which rose at an average rate of 36% annually during the same period. Electronic calculators. — The fastest growing seg- ment of the consumer products sector is the elec- tronic desk-top and pocket calculator industry. Pro- duction increased from $32 million in 1967 to $355 million in 1972, representing a 60% average annual growth rate over the 5-year period. Exports rose from $9 million in 1967 to $236 million in 1972, an average annual increase of more than 90%. Nearly 50% of the exported calculators were shipped to the United States in 1972; about 20% were sold to European Economic Community (EEC) countries; and 7% were exported to Canada and the United Kingdom. The overseas market for Japanese calculators expanded so rapidly that manufacturers were unable to organize sales networks. Consequently, foreign sales under the buyer's brand name are common. Sharp calculators, for example, are sold in the United States under the Burroughs name. Canon calculators under the name of Monroe, and Hitachi calculators under the Frieden label. The Japanese pocket calculator industry com- prises 16 firms; 7 of these firms make a variety of electrical equipment and produce other types of merchandise (e.g.. Canon makes calculators and cameras). Some 15,000 persons are employed in the manufacture or assembly of calculators. The major companies, their production capacity, and their share of the domestic market as of December 1973, are as follows: Production/ Market month share (units) (percent) Sharp Corp 300,000 28 Casio Computer Co.. Ltd 300,000 28 Canon, Inc 120,000 11 Eiko Business Machine 100,000 9 Sanyo Electric Co., Ltd 70.000 6 Ricoh Co., Ltd 50,000 5 Total 940,000 87 Three companies signed licensing agreements with U.S. firms in 1969 for the manufacture of desk-top or pocket calculators: Nippon Calculating Machine Corp. (Busicom) was licensed by Wyle Laboratories; Yokogawa Hewlett-Packard by Hewlett-Packard; and Canon, Inc., by Texas Instruments, Inc. Com- modore Japan, Ltd., a subsidiary of the U.S. firm Commodore International, Ltd., produces desk-top calculators. Approximately 98% of the firm's pro- duction is exported to the United States. Sharp Corp. developed the world's first electronic desk-top calculator in 1964. This transistorized solid state calculator, called COMPET CS-10A, proved superior to electric calculators in both speed and noise level and gave Japan an early lead in the world market for electronic calculators. Casio Computer introduced a low-priced, per- sonal desk-top calculator, "Casio Mini," in May 1972. Busicom, Omron Tateishi, and Citizen Watch Co., Ltd., followed with similar products, and Sharp, in June 1973, announced a new lower-priced model. Most manufacturers of Japanese desk-top calcu- lators are increasing their production capacity, al- though some minor producers have either withdrawn from the market or cut back production, due to increased costs of materials. Practically all Japanese-made calculators utilize LSI circuitry. Some of the large electric equipment firms are supplied with electronic components manu- factured in-house or by affiliated subsidiaries in their group. Other producers, however, are purchas- ing from outside vendors. Calculator manufacturers who produce LSI's are expanding production for their own use and also for sale to other assemblers. Japanese calculator manufacturers are now con- centrating their efforts on miniaturizing parts and integrating them. Sharp Corp. developed the COS (calculator on substrate) system for calculators in May 1973. This system integrates such parts as the display panel, drive system, and key connection on a single glass plate. Sharp's new calculator, called the "EL-809." also uses a liquid crystal display device. Matsushita Electronics developed a single chip LSI for 16-digit calculators which integrates 11,000 transistors on a 5.9 millimeter square semiconductor. This chip can replace six LSI's and nine other IC's. Hitachi is producing aluminum and silicon gate LSI's (P- and N-type) and Ion plantation silicon gate C/MOS's. It also is developing an SOS (silicon on sapphire) LSI. The use of LED's in calculator displays has been gradually increasing. Roughly 10% of the calcu- Fators produced in ^1972 had LED displays, while in 1973 nearly 20% had LED's. However, 90% of the LED displays are red, and Japanese manufac- turers are seeking to develop a GaP LED with a green display. Toshiba has developed mass pro- 80 duction technologies for the GaP LED, and Hitachi and NEC aim to shift from Ga AsP to GaP LED. There still are problems in mass production tech- nologies and production costs, however, and com- mercialization probably will be delayed until 1974 or 1975. Busicom and Sharp displayed liquid crystal cal- culators in the 1972 and 1973 Business Machine Shows in Japan. Sharp developed TN type liquid crystal with Dainippon Ink and Chemical, Inc., and in May 1973 introduced a liquid crystal display cal- culator called the EL-805 (8-digit). However, fur- ther development of liquid crystal technology is necessary to resolve the present problems regarding reliability and legibility. Real commercialization of liquid crystal for desk-top calculator use may not occur until after 1975. Competitive Environment Japanese production of the electronic components under review totaled $2.5 billion in 1973, represent- ing an average increase of 40% a year from the 1971 production level. Output is expected to grow at a slower rate — about 8% per year — between 1973 and 1977. Annual domestic production of these components is forecast to reach $3.4 billion in 1977. Past growth in the domestic electronic compo- nents industry stemmed largely from technical li- censing agreements with foreign firms, most often with U.S. manufacturers. Between 1945 and 1971, Japanese producers concluded 177 licensing agree- ments in the semiconductor and IC fields; 154 agree- ments regarding connectors, capacitors, resistors, switches, inductors, etc.; and 48 agreements con- cerning electron tubes. About 85% of these tech- nical licensing arrangements were with U.S. cor- porations. The Japanese electronic component industry started in the late 1950's in small private factories. By 1969, there were 6,000 component manufac- turers, with a total of 342,000 employees. The in- dustry today consists of two groups of companies — the companies that specialize in the manufacture of electronic components and the OEM's who make components for use in their electronic end products. The OEM group consists of such giant electrical firms as Hitachi, Ltd.; Toshiba Components Co., Ltd.; Matsushita; Mitsubishi Electronic Corp.; Sanyo Electric Co., Ltd.; and Sony Corp. When the demand for electronic goods started to climb in the 1950's, the OEM's began to manu- facture components to partially fill their own needs, acquiring technology through licensing. They rose to a strong leadership position in the components industry because of their financial, marketing, and technological strength. However, the OEM's were unable to produce all the components they needed and gradually formed subsidiary networks of com- ponent manufacturers such as Teikoko Tsushin Kogyo Co., Ltd.; Alps Electric Co., Ltd.; Tokyo Cosmos Electric Co., Ltd.; Nichicon Capicitor, Ltd.. Marucon Electronics Co., Ltd.; Matsuo Electric Co., Ltd.; Taiyo Yuden Co., Ltd.; and Hirose Electric Co., Ltd. The current trend is for Japanese producers of electronic components to shift their production facilities to developing countries in the Far East and South America. This change has been neces- sitated by the rise in Japanese wages (20% higher in 1973 than in 1972) and the 15% annual in- creases in industrial land values. The manufacturing subsidiaries of Japanese firms in Taiwan and Korea are now serving as a supply base for less sophisti- cated components for their parent companies in Japan. Total Japanese exports of the electronic com- ponents surveyed grew an average of 65% annually between 1971 and 1973, reaching $268.6 million. The rate of export growth is forecast to decline sharply between 1973 and 1977, as Japanese firms are expected to fill an increasing number of foreign orders from the output of their overseas factories. Electronic component technology in Japan lags 1 to 2 years behind that of the United States. The structure of the Japanese electronics industry is such that innovation comes from the OEM instead of the component manufacturer, who is essentially in the position of filling orders rather than developing product lines. Efforts to develop new items typically begin after a foreign originator has marketed a product and proved its commercial success. This practice is not likely to change. The government's announced R&D budget in the electronics field for 1971-77 included only 10% for components — 4% for parts for circuits, printing of circuits, and components; 4% for integrated circuits; 1 % for electron tubes; and 1 % for semiconductor elements. U.S. -Japan joint-venture companies have been established to supply components that are in local demand and that require highly sophisticated tech- nologies, such as integrated circuits. Such compo- nents are usually in short supply in Japan. Less than 1 % of the total production of such com- panies is exported to the United States, and exports to third countries are even smaller. Integrated circuits. — The development of solid state computer memories demonstrates the tech- nological disparity between the United States and Japan. Japan is roughly 1 to 2 years behind the United States in MOS Random Access Memories (RAM). The U.S. market for 1,024-bit memories has been firmly established, and 4,096-bit memories have been developed and marketed. Hitachi recently developed the technology for 4,096-bit N-MOS mem- 81 ories, and Fujitsu has developed a 2,048-bit mem- ory, but neither Japanese company has commercial- ized these products. The discrepancy between Japanese and American technology in IC's arises partly from the shortage of R&D funds for basic research currently available to Japanese component manufacturers. Another major factor is the small market for IC's in Japan compared to the United States, making it less feasi- ble economically for manufacturers to tool up for new technology product lines. Japanese producers also are reluctant to develop products if they cannot foresee steadily rising future sales volumes. Values of Japanese production of IC's in 1973, by type, follow in millions of U.S. dollars. Semiconductor IC's linear 95 bipolar 85 MOS 142 Hybrid IC's thin film 17 thick film 46 There were 15 firms producing IC's in Japan in 1973, three of them U.S. subsidiaries. Produc- tion of IC's is expected to increase an average of nearly 25% annually between 1973 and 1977, climbing from $384.5 million to over $900 million. OEM's account for almost 90% of total IC pro- duction. The aggregate IC production of Nippon Texas Instruments and TDK-Fairchild (U.S. sub- sidiaries) reached an estimated $30 million in 1972. The output of Kyodo Denshi, the only Japanese- owned electronic component manufacturer that does not also produce equipment, totaled about $3.8 million in 1973. Japanese IC manufacturers are making major in- vestments in advanced componentry production, focusing on IC's and N-Channel MOS devices. Nip- pon Electric Corp. (NEC) has established a new subsidiary in Kyushu with production facilities for MOS's and LSI's. New equipment to make IC mem- ories and C/MOS circuits was purchased by NEC in late 1973. Fujitsu invested $18.9 million in equipment for IC production in 1973 and expects its annual in- crease in investment for IC and IC-related produc- tion to average 25 to 35% for the next several years. Fujitsu is expanding its main IC factory in Aizu and plans to purchase new production equip- ment for its Kawasaki plant. Toshiba is investing $3.7 million to increase pro- duction in its IC plant at Oita from 2.5 million IC's per month to 5 million per month by July 1974. C/MOS producers are competing to participate in the newly emerging electronic watch industry market. Hitachi and Oki were the first to market C/MOS IC's. Toshiba, NEC, Mitsubishi, and Kyodo entered the market at the end of 1973. About 20 firms probably will produce C/MOS's in 1974, in- cluding 3 U.S. subsidiaries — Texas Instruments, Mo- torola, and RCA. Testing equipment has been and will continue to be a major problem for domestic producers of advanced circuitry in Japan. Several firms have gone heavily into the field, only to find their pro- duction progress blocked in the testing phase. Until this technological problem can be dealt with, elec- tronics manufacturers will continue to rely on foreign sources for highly specialized components. Color TV picture tubes. — All color TV picture tubes used in Japan are produced by Japanese equipment manufacturers. The approximate market shares of the leading producers are Toshiba, 30% ; Matsushita, 25%; Hitachi, 23%; Sony, 10%; NEC, 6%; and Mitsubishi, 6%. Japanese manufacturers are actively pursuing development of CRT's with 90° to 100° deflection and black matrix systems. Toshiba has already commercialized its "Hi-bright Matrix Color CRT" using a black background method. Mitsubishi started to mass produce 110° deflection CRT's in 1972, and Sony has developed the first wide-angle 1 14° deflection color CRT made in Japan. Problems regarding color gap and production costs have slowed development of black matrix 110° de- flection CRT's, but Toshiba, Hitachi, and Matsu- shita recently found techniques to overcome these problems. Resistors. — Local production of resistors increas- ed at an average annual rate of 39% between 1971 and 1973, rising from $176.8 to $341.7 mil- lion. The average annual rate of production growth is forecast to decline sharply to 9% during the next 4 years, as many Japanese resistor manu- facturers will be investing in developing countries for production of these components. Japanese output of wirewound resistors grew from $9 million in 1969 to $22 million in 1973, while metal film resistor output rose from $6 to $15 million. All the leading resistor producers are licensees of U.S. firms and include Koa Denko Co., Ltd.; Tama Electric Co., Ltd.; Hokuriku Electric Industrial Co., Ltd.; and Tokyo Cosmos Electric Co., Ltd. The major OEM's who also make resistors are Matsushita Electric Industrial Co., Ltd., and Alps Kenki Co. Capacitors. — About 25% of the total $138-mil- lion output of aluminum electrolytic capacitors in 1972 was produced by Matsushita Electric Industrial Co., Ltd. Elna Co., Ltd., produced about 1 8% of the total: Nichicon Capacitor, Ltd., 16%; Marucon Elec- tronics Co., Ltd.. about 14%; and Hitachi Con- denser Co., Ltd., 8%. Production of tantalum electrolytic capacitors reached $19 million in 1972, with 40% provided by NEC and 12% by Fujitsu, Ltd. 82 Total output of ceramic capacitors reached $79 million in 1972. The approximate 1972 market shares of leading manufacturers of ceramic capaci- tors were TDK Electronics Co., Ltd., 24% ; Murata Manufacturing Co., Ltd., 22%; Matsushita Electric Industrial Co., Ltd., 18%; and Taiyo Yuden Co., Ltd., 15%. Transistors. — Nearly 90% of the transistors pro- duced in Japan are made by OEM's. The major manufacturers of transistors include Hitachi, which accounted for 2 1 % of the $296-million transistor output in 1972; Toshiba, 19%; Matsushita Elec- tronics Corp., 15%; and Mitsubishi, 19%. Production of germanium transistors is decreasing, but silicon transistor output is still growing. Sony has developed a power field effect transistor (FET) and has built facilities capable of producing 20,000 such transistors per month. The outlook for domestic demand for all but specialized transistors is generally pessimistic because of the development of IC's, and slow growth in production is expected until 1975. Output then is forecast to decline. Connectors.. — Production of connectors reached $48 million in 1972. Two U.S. licensees, Nippon Aviotronics Co., Ltd., and Daiichi Denshi Kogyo Co., Ltd., accounted for 54% of this output. Hirose Electric Co., Ltd. had 22% of connector output. Other firms making connectors include Nippon AMP Co., a wholly owned U.S. firm,' and two U.S.- Japan joint venture companies, Nippon Burndy Co. (Burndv Corp.) and Mitsumi Shinchi (United Carr, Inc.). Diodes and rectifiers.. — Electronic end-product manufacturers make 90% of the diodes they use and 40% of the rectifiers. Hitachi, Toshiba, and some of the other equipment producers are able to supply approximately 60% of their own require- ments. Rectifier production is expected to increase at an average of about 7% annually between 1974 and 1977, but diode production probably will de- crease by an average of 5% yearly during this period, due to wider use of IC's. Component production plants expanding. — The major electronic component, manufacturers are ex- panding their production facilities or investing in equipment to upgrade their production capability. Hitachi invested an estimated $11 to $15 million in 1973 to expand its semiconductor production. The investment was expected to raise the value of its semiconductor sales to about $190 million yearly. NEC in 1964 began to decentralize its produc- tion facilities and to establish new subsidiaries in widely scattered localites. These plants included Yamagata-NEC for transistor production, Kago- shima-NEC for display tubes, and Hyogo-NEC for lead switches. At a cost of $11.3 million, NEC in 1973 set up Toyama-NEC to produce condensers and variable resistors. The establishment of Toyama- NEC completed the plant decentralization plan, and NEC now will concentrate on investing in produc- tion facilities for new products and modernization of existing plants. Fujitsu planned to invest about $29 million for electronic component production facilities in the 1973-74 period, and Toshiba spent about $30 million for the same purpose in 1973. Foreign suppliers are numerous. — U.S. suppliers who have successfully entered the expanding Jap- anese electronic components market include Burr- Brown Research Corp., Collins Radio Co., General Instrument Corp., and Intel Corp. (IC's); and Analog Devices, Inc., Crystalonics Div. of Teledyne Co., and Teledyne Semiconductor (field effect tran- sistors). Also, Dale Electronics, Inc. (resistors); Thomas Electronics, Inc. (CRT's); Varo Semiconductor, Inc. (rectifiers); Fairchild Semiconductor (semiconduct- ors and IC's); Solitron Devices, Inc. (diode tran- sistor rectifiers and IC's); Laser Diode Laboratory, Inc. (laser diodes); and Monsanto Co. (light emit- ting diode indicators, displays and visible arrays, and other products). Other foreign suppliers include Allgemenie Elek- tricitatets Gesellschaft and AEG Telefunken of Ger- many, Thomson-CSF of France (electron tubes). GE/TI/ECC/Microsystem of Canada, and SGS- ATES of Italy (transistors, diodes, and IC's). Term- inals and connectors are supplied by AMP Inc. (U.S.) subsidiaries in France, Germany, Italy, The Netherlands and the United Kingdom. Duties and trade restrictions. — Japanese customs duties range from 6 to 12% for electronic compo- nents. Exporters should investigate specific rates since there are some variables. For example, IC's imported uncased are dutiable at 8% but dutiable at 12% if imported cased. The definition of cased depends on the type of IC. Information on official duty rates applicable to specific products within the product category may be obtained from the U.S. Department of" Com- merce, Domestic and International Business Ad- ministration, Room 4217, Main Commerce, Wash- ington, D.C. 20230. Any IC that contains 200 or more elements (i.e., individual diodes, transistors, resistors, capacitors, etc.) cannot be imported without obtaining prior approval from the Ministry of International Trade and Industry. Approval is based on import quotas that are set every 6 months for importers; approval usually is granted for those with an established record of importing TC's. Technical Requirements Electric power in Japan is supplied through low-voltage lines, providing 100-volt, single-phase or 83 200-volt, 3-phase electricity; or through high-voltage lines of either 3,000 or 6,000 volts, 3-phase. Some larger plants and buildings may be supplied by 10,000- or 20,000-volt lines. Electrical frequency is 50 hertz in northern Japan, including Tokyo, and 60 hertz in the rest of the country. Japanese law permits the use of only the metric system for measurement and calibration. Published national standards for electronic com- ponents in Japan may be obtained through the American National Standards Institute, Inc., 1430 Broadway, New York, N.Y. 10018. The following market research study, upon which this Country Market Survey is based, is available on loan from the U.S. Department of Commerce, Do- mestic and International Business Administration, Room 1617M, Main Commerce, Washington, D.C. 20230: "The Market for Electronic Components in Japan," DIB 74-04-504, October 1973. 84 Mexico Mexico: Size of market for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) 1 1 1969 Mexico's market ' for the selected groups of electronic components covered in this survey is expected to expand at an average annual rate of 12.6% over the 1973-77 period. Sales in 1977 should reach over $40 million, compared with $18.7 million in 1971 and $25.6 mil- lion in 1973 (see table 1). Steadily rising consumer demand for television sets and stereo- phonic sound equipment, coupled with heightened industry interest in developing export markets, will contribute to increased sales of electronic components. Imports averaged 17% of the total Mexican market for product category components during the 1971-73 period. Purchases from foreign suppliers went up 57%, from $2.8 million in 1971 to $4.4 million in 1973. Predicted increases averaging in ex- cess of 10% annually would raise imports to $6.6 million in 1977. Specialised items that domestic manufacturers find unprofitable to produce will con- tribute to the bulk of this growth. American exporters supplied 46% of Mexico's import market for product category components in 1972, recording sales of almost $2 million (see ta- ble 2.) The U.S. share should continue to be close to 50% during the 1974-77 period. The predominance of U.S. manufacturing subsidiaries and licensees in all sectors of Mexico's electronics industry is the basic factor favoring continued U.S. leadership in this market. The source and type of electronic com- ponents imported by the various manufacturers is determined almost entirely by their affiliation with overseas electronics firms. Mexican subsidiaries and 1973 1977 Color TV picture tubes Capacitors Transistors Resistors Diodes and rectifiers Integrated circuits 1 This survey excludes discussion of Mexico's "border industries." Goods are imported by factories in Mexico, held in bond for assem- bly and/or further manufacture, and re-exported without officially entering the country. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Product Category Definition Electronic components covered in this survey are basically confined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product category" as used in this pub- lication is limited to these six groups of components. 85 Mexico — Selected Indicators (1972) $41.2 billion 53 million (est.) $2.9 billion Gross domestic product: Population: Total country imports: Imports from U.S. (w/ share of total): Total country exports: Exports to U.S. (w/share of total): Exchange rate (May 1974): $1.8 billion (60%) $1.8 billion $1.1 billion (62%) 12.48 pesos=US$l licensees of U.S. electronics manufacturers, for ex- ample, account for 95% or more of the country's imports of American-made components. Sales Opportunities Mexico's manufacturers of electronic end-prod- ucts are expected to consume nearly $139 million worth of product category components during the 1974-77 period. Imports are expected to account for approximately $27 million of this total. A market research survey recently conducted in Mexico for the U.S. Department of Commerce, Of- fice of International Marketing reveals that favor- able sales opportunities exist for American export- ers of the following electronic components: Resistors. — The United States exported more than $500,000 worth of resistors to Mexico in 1972, supplying 40% of the import market. The market for resistors, keeping pace with the steady growth of Mexico's electronics industry, should approach $5 million in 1977, compared with over $3 million in 1973. Most domestically produced resistors are designed for use in the manu- facture of consumer products, particularly television sets and radios. Makers of precision instruments, telecommunications equipment, and other special- ized industrial/commercial electronic equipment re- quire resistors of closer tolerances, higher quality, greater reliability, and more advanced design than those available from domestic producers. Conse- quently, Mexican dependence on foreign suppliers of resistors is expected to continue at 35 to 40% of consumption during the 1974-77 period. Fixed com- position, fixed film, fixed wirewound, and variable wirewound resistors are expected to offer the best sales prospects. Transistors. — Approximately 20% of the tran- sistors purchased by Mexico's electronics industry are obtained from foreign sources, principally the United States. American transistors accounted for 1972 purchases totaling $384,000, or 62% of the import market. As consumption rises from the 1973 level of $4.2 million to a projected $6.3 million in 1977, Mexican dependence on imported transistors is expected to continue at the current level. Taking advantage of liberalized trade regulations within the Latin American Free Trade Association (LAFTA),2 leading multinational corporations currently supply their Mexican subsidiaries from their plants in other LAFTA member countries. The Mexican market will nevertheless continue to hold good potential for advanced U.S. -made silicon transistors for spe- cialized applications. Diodes and rectifiers. — The electronics industry's consumption of diodes and rectifiers, estimated at $2.7 million in 1973, may only reach $3 million in 1977. The growth of the market has been slowed by the increasing utilization of integrated circuits. However, imports should continue to supply one- third of the market, providing opportunities for American suppliers of power rectifiers, silicon di- odes, zener diodes, LED's, and other special types of diodes. U.S. -made components accounted for 58% — or almost $563,000 worth— of Mexico's 1972 purchases of imported diodes and rectifiers. Integrated circuits. — IC's were first manufactured in Mexico in 1970 but the quantities produced to date are small. Demand — especially for hybrid IC's — should increase sharply during the 1974-77 pe- riod. Consumption should exceed $3.4 million in 1977, compared to $1.2 million in 1973. It is ex- pected that Mexican component manufacturers will be hard-pressed to satisfy the demand for the full range of specialized types of IC's. IC imports, of which U.S. suppliers accounted for approximately 76% in 1972, should more than double their 1973 level, reaching over $1 million in 1977. Other electronic components. — A good growth market for miscellaneous electron tubes outside the product category is emerging in Mexico. U.S. ex- porters provide most of Mexico's requirements for transmitting, industrial, and special-purpose tubes, as well as gas vapor tubes such as thyratrons, photo tubes, and diode rectifiers. The United States should continue to fill the bulk of the demand for these items during the 1974-77 period. Selected End-User Industries Mexico's electronics industry was developed by leading United States, German, Dutch and, more recently, Japanese manufacturers, and few com- panies are entirely Mexican-owned. The great ma- jority are wholly owned subsidiaries or licensee/ joint ventures of well-established international firms. Although Government policies have brought about a greater participation of Mexican capital and have 2 LAFTA member countries are: Argentina, Bolivia. Brazil, Chile, Colombia, Ecuador, Mexico. Paraguay, Peru. Uruguay, and Vene- zuela. 86 led to the development of managerial skills among Mexican personnel, the industry still draws exten- sively on foreign technology. Mexico's electronics industry comprises an esti- mated 200 firms, most of which produce several lines of equipment. Data gathered by Mexico's De- partment of Industry and Commerce indicate that, in 1970: A total of 84 firms were making television, radio, and audio equipment; 33 were producing other electronic equipment and apparatus; and 181 were manufacturing parts and accessories, including product category components. The 12 largest elec- tronics manufacturers, each employing more than 500 workers, accounted for slightly more than 50% of the industry's total production, which was esti- mated to have exceeded $270 million in 1970. The Mexican Government gives high priority to the further development of all sectors of the coun- try's industry, including the electronics products in- dustry. Under official aegis, production facilities are being modernized, and manufacturers are beginning to locate in areas outside the excessively developed Distrito Federal (Mexico City). Tax incentives, ranging from partial to complete waiver, have been the Government's principal means of accomplish- ing these aims. Recipient firms must meet certain requirements as to the degree of Mexican owner- ship (51% minimum), the percentage of capital in- vestment funds to be spent within Mexico (60% minimum), and the sums to be paid to foreign sources for royalties, trademarks, and technological assistance. In addition, automatic tax credits of 11 to 14% on the f.o.b. factory value of exported goods are granted to exporters of approved prod- ucts, which include most finished electronic products and components. Despite official encouragement and assistance, Mexico's electronics manufacturers have not found it practical to try to keep pace with rapidly chang- ing electronic technology. Management is competent but its largely oriented toward the solution of short- term problems. It therefore does not typically en- gage in long-term planning and spends little on re- search and development. Furthermore, electronics manufacturers feel that the size of the market for their products does not warrant frequent heavy in- vestments in production equipment. Hence, innova- tions are introduced gradually and only as dictated by the product designs supplied by their foreign licensors. Furthermore, the availability at modest cost of workers who, once trained, are capable and productive, has held back automation of the coun- try's production processes. Consumer products sector. — The consumer prod- ucts sector of Mexico's electronics industry is by far the largest market for electronic components, ac- counting for at least 80% of product category com- ponent consumption. Unit sales of the major elec- Mexico — The Electronics Industry Basic Data (1972) Total value of production (1970 est): $270 million Number of manufacturers 1 (1970 est): 200 Industry labor force (1970 est): 30,000 Output by quantity of principal electronic com- ponents user industries — Consumer products in- dustries: television receivers 444,377 units car radios 169,540 units other radios 729,527 units tape recorders 10,355 units portable record players 63,336 units juke boxes 2,498 units Industrial/commercial equipment industries: desk calculators 10,000 units automotive alternators 156,000 units automotive voltage regulators 120,000 units tronics items totaled 1.4 million in 1972 and should exceed 2 million in 1977. An average annual growth rate of 12% in sales volume is projected for 1973- 77, with the most rapid expansion taking place in 1974. The industry seems to have recovered from the setback it suffered in 1971 when the Govern- ment raised the excise tax on manufacturers of con- sumer electronics products from 3 to 10% and im- posed an additional 10% excise tax at the retail level. Strong industry protest, accompanied by dras- tic drops in both production and sales of the af- fected products, forced the Government to rescind the additional taxes in 1972. The growing purchasing power of the Mexican worker and the steady expansion of the middle- class population lead market analysts to predict marked increases in production and sales of color television sets and audio equipment. The historical and projected future trends in unit sales of the major consumer electronics products are illustrated in table 3. A limited number of hand-held electronic calcula- tors are now being produced in Mexico. However, this production is meeting stiff competition from imported calculators, notably those produced in bond by the "border industries," and will probably be suspended. Television industry. — Color TV broadcasting in Mexico was inaugurated in 1967 and domestic manufacturers produced 8,200 sets in that year. Color TV sales have risen rapidly since then, to- 87 Table 1. — Mexico: Size of market1 for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Description 1969 1971 1972 1973 1974 1977 Resistors Production' 1.5 1.7 1.6 1.8 2.1 2.9 Imports 1.1 .8 1.3 1.4 1.5 2.1 Exports 1 .1 .1 .2 .2 .2 Market size 2.5 2.4 2.7 3.1 3.4 4.8 Capacitors Production8 5.1 5.4 5.7 6.4 7.2 10.1 Imports 5 .5 .7 .8 .9 1.3 Exports 3 .4 .5 .5 .6 .8 Market size 5.3 5.6 6.0 6.7 7.5 10.6 Color TV picture tubes Production' 3.7 4.8 6.7 8.9 10.3 15.5 Imports 3 .2 .2 .1 .1 — Exports — .4 .8 1.3 1.6 2.5 Market size 4.0 4.6 6.1 7.7 8.8 13.0 Diodes and rectifiers Production2 1.6 2.1 1.8 2.0 2.0 2.1 Imports 7 .5 1.0 .9 .9 1.0 Exports 1 .1 .1 .1 .1 .1 Market size 2.2 2.5 2.6 2.7 2.7 3.0 Transistors Production- 2.7 3.0 3.2 3.7 4.0 5.5 Imports 6 .5 .6 .7 .8 1.1 Exports 2 .2 .2 .2 .2 .3 Market size 3.1 3.3 3.6 4.2 4.6 6.3 Integrated circuits Production2 — * .5 .7 .9 2.4 Imports — .3 .4 .5 .6 1.1 Exports — — * * * .1 Market size — .4 .9 1.2 1.5 3.4 Totals Production2 14.6 17.0 19.5 23.5 26.5 38.5 Imports 3.2 2.8 4.2 4.4 4.8 6.6 Exports 7 1.2 1.8 2.3 2.8 4.0 Market size 17.1 18.7 21.9 25.6 28.5 41.1 1 Size of market equals production plus imports minus exports. Parts and accessories not included. - Production figures do not include components manufactured by OEM's for their own use. * Less than $50,000. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. taling 42,500 units in 1973. This figure will prob- ably double by 1977. Nevertheless, because of the relatively low per-capita income of the Mexican consumer, black-and-white sets continue to domi- nate the market. More than 400,000 such sets, hav- ing a total value of over $80 million, were sold in 1972. Sales should approach 600,000 sets in 1977, reflecting an average annual growth rate of approxi- mately 8.5%. Seven major subsidiaries or licensees of foreign firms are engaged in the manufacture of TV sets in Mexico. These companies are: Admiral de Mex- ico, S.A. de C.V.; General Electric de Mexico, S.A.; Philco, S.A. de C.V.; Construcciones Electronicas, S.A. (Magnavox); Telefunken Mexicana, S.A. de C.V.; and Television del Distrito Federal, S.A. (Hitachi). Together, Admiral, General Electric, and Philco account for roughly 50% of the market. All color TV sets made in Mexico employ hybrid circuitry. Only 15% of monochrome sets are fully transistorized, 55% are hybrid, and 30% use no transistors at all. No significant changes in this technological pattern are expected to occur during the 1974-77 period. Vertical integration within the Mexican television set industry is confined mainly to the manufacture of parts and accessories, such as tuners, yokes, fly- back transformers, and coils. Despite the difficulties arising from their dependence on a single source of supply, none of the firms plans production of re- sistors, capacitors, or other product category com- ponents. Both Television del Distrito Federal and Philips Mexicana, S.A., however, obtain part of their requirements for such components from Mexi- 88 can firms affiliated with their parent corporations. Industrial/ commercial equipment sector. — The auto industry is the major user of product category components in Mexico's industrial/commercial equipment sector. Its purchases of diodes and transis- tors for use in automotive alternators and voltage regulators are expected to exceed $1 million in 1977, compared with $630,000 in 1972. Other industrial users of electronic components include the makers of desk calculators, certain telephone equipment, and juke boxes. Together with the auto industry, these manufacturers account for an estimated 20% of Mexico's consumption of product category com- ponents. Computers, electronic telecommunications equipment, electronic measuring and testing equip- ment, and medical electronic equipment — all of which are in high demand in Mexico — are usually imported as finished products. Automotive industry. — Seven of the world's lead- ing automobile manufacturers produce motor ve- hicles in Mexico. They are: American Motors, Chrysler Corporation, Ford Motor Co., and Gen- eral Motors, all of the United States; Renault of France; Volkswagen of Germany; and Datsun of Japan. New vehicle sales, which totaled 233,437 automobiles in 1972, are expected to rise to 420,500 in 1977. The auto industry's use of electronic components, now limited to those types of transistors and diodes needed for alternators and voltage regulators, should increase markedly when Mexican production of electronic ignition systems begins in 1976. Trade sources estimate that output of these systems, now being imported by Chrysler as finished products, could amount to 145,000 units in 1977. Two firms — Industria Electrica Automotriz, S.A., and Corporacion de Radio, S.A. — make most of the alternators and other electronic devices required by Mexico's auto industry. Both companies are con- trolled by the same Mexican financial interests and receive technical support from the U.S. firms, Auto- lite and Motorola, respectively. They buy electronic components from Mexican affiliates of Motorola, Toshiba (Japan), and Fairchild Camera and Instru- ment (U.S.). Chrysler purchased the bulk of the 120,000 voltage regulators produced by the two companies in 1972. The Competitive Environment Mexico's electronic component manufacturing sector represents one of the country's fastest-grow- ing industries, chiefly because Government protec- tionist policies have encouraged equipment pro- ducers to use domestically made components to the fullest extent possible in meeting the strong demand for consumer and other electronic products. Production of product category components, valued at $14.6 million in 1969, rose to $23.5 million in 1973. Output is expected to increase at an average annual rate of more than 13% during the 1973-77 period, exceeding $38 million in the latter year. Manufacturers of color TV picture tubes, inte- grated circuits, and transistors were responsible for the greatest increases in domestic production. Fore- casts for the 1973-77 period suggest that output of IC's will show an average annual growth rate of 36%, while production of color TV tubes, resistors, capacitors, and transistors is expected to rise by 10 to 15% annually. Output of diodes and recti- fiers is likely to continue near the 1971 level of $2.1 million. In addition to meeting strong domestic demand, Mexico's electronic component industry succeeded in increasing its exports of product categorly com- ponents from $1.2 million in 1971 to $2.3 million in 1973. The tax incentives referred to earlier, along with further reductions in trade barriers between LAFTA member nations, should boost exports to $4 million in 1977. Export demand for Mexican color TV tubes and capacitors is expected to be particularly strong. Manufacturers expect to ship $2.5 million worth of color TV tubes and $800,000 Table 2. — Mexico: Imports from the United States^and U.S. share of total imports jOf selected groups of electronic components, 1969-72 1 (in thousands of U.S. dollars) 1969 1971 1972 U.S. share U.S. share U.S. share Description Value (percent) Value (percent) Value (percent) Resistors 518 46 467 57 509 40 Capacitors 88 20 116 22 71 10 Color TV picture tubes 171 68 107 65 88 53 Diodes and rectifiers 582 79 338 67 563 58 Transistors 401 69 375 82 384 62 Integrated circuits — — 304 91 308 76 Total 1,760 56 1,707 61 1,923 46 ' Parts and accessories not included. Also excludes shipments from the United States to the "border industries" when such goods are held in bond for manufacturer's use and re-export. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. 89 Table 3. — Mexico: Sales of consumer electronic prod- ucts, in units, 1969, 1972, and projected 1977 1969 1972 1977 Monochrome TV sets 360,208 401,930 588,406 Color TV sets 43,160 42,447 96,300 High fidelity and/or stereo consoles 135,164 170,947 362,900 Stereophonic audio equip- ment w/cabinet 10,931 21,599 89,400 Tape recorders 6,851 10,355 24,000 Portable record players .. 66,091 63,336 65,000 Radios, other than automobile 630,221 536,981 500,000 Car radios 132,100 169,540 280,000 Source: U.S. Department of Commerce, Bureau of International Commerce market survey. worth of capacitors to foreign customers in 1977. Fourteen manufacturers are engaged in the pro- duction of electronic components in Mexico. Among the most important in terms of range of components marketed are subsidiaries of Fairchild Semiconduc- tor Inc., Philips, and Toshiba. Four firms account for most of Mexico's output of resistors, both fixed and variable, including carbon, film, and wire- wound. Fixed capacitors — the only type produced in Mexico — are made by six companies under license from Philips, Sprague Electric Co., and Zenith, among others. Both resistor and capacitor manufacturers import substantial quantities of raw materials such as wire, ceramic powders, and mylar insulating material. Subsidiaries and licensees of two American firms (RCA and GTE Sylvania), one Dutch company (Philips), and one Japanese manufacturer (Hitachi) assemble color TV picture tubes, using imported electron guns, glass envelopes, and shadow masks. Their combined output, which totaled 106,000 units in 1973, should be sufficient to meet domestic de- mand by 1975. Makers of color TV picture tubes are expected to be producing nearly 200,000 units annually by 1977, using domestically manufactured parts exclusively. Diodes and rectifiers are made in Mexico by four subsidiaries and licensees of American, Dutch, German, and Japanese component manufacturers. Three of these firms — affiliates of Fairchild, Philips, and Toshiba — also make transistors and import most of the wafers. Integrated circuits are manufac- tured by Fairchild, Toshiba, and Cia. General de Electronica, S.A. Most major U.S. and third-country electronic component producers have established sales and/or manufacturing subsidiaries or exclusive representa- tion to market their products in Mexico. Neverthe- less, opportunities exist for other U.S. suppliers — particularly those offering highly specialized product lines — to establish themselves in this market. Mexi- can trade policy is protectionist but places most foreign suppliers, other than LAFTA members, on an equal footing. U.S. component manufacturers benefit, however, from the high degree of U.S. par- ticipation in the ownership of Mexican electronic equipment firms. The Government of Mexico has long sought to promote the substitution of domestic production for imports. This policy, implemented primarily by means of stringent controls on the granting of im- port permits, is applied not only to electronic com- ponents but to the full range of goods entering Mex- ico. The Government recently has placed greater emphasis on trade with other LAFTA members to take advantage of lowered trade barriers and to help improve the balance of payments between Mex- ico's relatively industrialized economy and the econ- omies of its neighbors to the south. Reflecting the new emphasis, trade in electronic components be- tween Mexico, Brazil, and Argentina is already in- creasing. Much of the rise reportedly can be traced to the activities of multinational corporations. Their affiliates are being urged to specialize in the produc- tion of certain components for the entire Latin American market rather than to attempt to manu- facture the full product line in each of the three abovementioned countries. Import duties. — Ad valorem duties on most prod- uct category components range from 4 to 20%, with duties of 30 to 50% on certain types of re- sistors. Information on official duty rates applicable to specific components within the product category may be obtained from the U.S. Department of Com- merce, Domestic and International Business Ad- ministration, Room 4217, Main Commerce, Wash- ington, D.C. 20230. Technical Requirements The electrical power supply characteristics in most areas of Mexico are 100 volts, 60 hertz. How- ever, Mexico City still operates on 125 volt, 50 hertz current. Pending the completion of a conver- sion program, all imported equipment should be suited for both 50- and 60-hertz operation. The metric system of weights and measures is the statutory standard in Mexico. Published national standards for electronic com- ponents in Mexico may be obtained through the American National Standards Institute, Inc., 1430 Broadway, New York, N.Y. 10018. The following market research study, upon which this Country Market Survey is based, is available on loan from the U.S. Department of Commerce, Do- mestic and International Business Administration, Room 161 7M, Main Commerce, Washington, D.C. 20230: "The Market for Electronic Components in Mex- ico," DIB 74-02-512, November 1973. 90 Sweden Sweden: Size of market for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Sweden's electronics industry is rapidly expanding production to take advantage of the mushrooming worldwide demand for electronic products. Industry output is expected to climb from $912 million to $1.5 billion during the 1972-77 period — an increase of 64%. The Swedish market for electronic components covered in this survey is expected to grow at an even more rapid rate than industry output during the same period. Based on a pre- dicted 19% average annual growth rate, the market is forecast to more than double from $76.2 million in 1972 to nearly $155 million in 1977. The market in 1973 amounted to $96.8 mil- lion, an impressive $20.6 million increase over 1972 (see table 1). Sweden imported more than 75% of product category components needed for its fast-growing electronics industry in 1973. Imports rose from $40.5 million in 1971 to $73.1 million in 1973 and should increase 10% a year into 1977, when they are expected to total almost $110 million. Swedish purchases of U.S. -made components within the product category amounted to $10.3 mil- lion in 1972, accounting for 18% of the total im- port market (see table 2). The United States is already Sweden's leading supplier of many of the more advanced components. The country's growing requirements for advanced components, coupled with the need to establish additional sources for components in short supply, ensure good prospects for further market penetration by American exporters. Other foreign suppliers of product category com- i( iT , ponents to Sweden include Germany, the Nether- lands, the United Kingdom, and France. 46 8 0 5 10 15 20 25 30 35 40 45 50 1969 [_ \ 1973 Xffi\ 1977 | | Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Product Category Definition Electronic components covered in this survey are basically confined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product category" as used in this pub- lication is limited to these six groups of components. 91 Sweden — Selected Indicators (1972) ) Gross national product: $41.9 billion Population: 8.2 million Total country imports: $8 billion Imports from U.S. (w/share of total): $583 million (7%) Total country exports: $8.7 billion Exports to U.S. (w/share of total): $616 million (7%) Exchange rate (May 1974): 4.28 kroner=US$l Sales Opportunities The Swedish electronics industry is entering a period of rapid transition from the use of compo- nents in their maturing or declining life cycle stages to the widespread application of advanced devices which have been introduced in the last few years. A market research survey recently conducted in Sweden for the U.S. Department of Commerce, Of- fice of International Marketing reveals that favor- able sales opportunities exist for American exporters of the following electronic components. Color TV picture tubes. — Sweden's market for color TV picture tubes more than doubled from $14.7 million in 1971 to $30 million in 1973. The rise has been in response to high domestic demand for color television sets. The market is expected to advance 20% during the 1973-77 period, exceeding $36 million in the latter year. There is no domestic production of color TV picture tubes in Sweden. Manufacturers of television sets therefore rely entirely upon imports to fulfill their requirements. The country's two major tele- vision manufacturers reportedly have been forced to limit their production because of the worldwide shortage of electronic parts and components. This puts U.S. exporters in a favorable position to in- crease their share of the picture tube market, which in 1972 was a modest 3%, or $700,000. Capacitors. — Annual Swedish purchases of capac- itors increased more than 68% during the 1971- 73 period, rising from $12.4 million to $20.9 mil- lion. Purchases are expected to approach $32 million in 1977. Imports of capacitors rose steadily from $6. 1 mil- lion in 1971 to $9.1 million in 1973. Based on a predicted 14% average annual growth rate, imports are projected to exceed $15 million in 1977. U.S. firms, which accounted for 21% ($1.5 million) of the 1972 import market, should find the following devices highly salable: • Tantalum electrolytic capacitors • Aluminum electrolytic capacitors • Metallized plastic capacitors New applications for capacitors in a wide range of electronic end products and subassemblies should bolster sales despite the displacement of some types by integrated circuits. In particular, demand for metallized plastic film and electrolytic capacitors should remain strong for the next several years. Integrated circuits. — The Swedish market for in- tegrated circuits is expected to rise from $16.1 million in 1973 to nearly $47 million in 1977, re- flecting an average annual growth rate of 30%. Purchases grew by about 60% during the 1971-73 period, up from a modest base of $6.2 million in the former year. Imports should virtually triple from $9.3 million in 1973 to nearly $27 million in 1977. Swedish purchases of American-made integrated circuits ad- vanced 130% from $1.3 million in 1971 to $3 million in 1972, increasing the U.S. import market share from 38 to 42% in that period. The following types of IC's offer the best sales opportunities for American manufacturers: • Linear integrated circuits • Digital integrated circuits — bipolar, including MSI/LSI — MOS, including PROM — TTL • Hybrid integrated circuits — thick film — thin film Resistors. — The Swedish market for resistors in- creased an average of 22% a year between 1971 and 1973, rising from $9.1 million to $13.6 million. Annual purchases are projected to approach $16 million in 1977. Imports grew from $7.2 million in 1971 to $10.9 million in 1973 and should reach $12.5 million in 1977. Purchases of resistors from the United States in 1972 amounted to $1.3 million, or 14% of total imports. Swedish equipment manufacturers are replacing carbon resistors with metal film and metal oxide re- sistors because of the superior tolerance, stability, and reliability of the metal resistors. Carbon re- sistors, in turn, are displacing composition resistors in some applications. Swedish users are showing a preference for cermet potentiometers, which should be an expansionary market for the next few years. American manufacturers supply virtually all of the precision potentiometers used in the country, and these devices should enjoy good future sales. Rising Swedish demand for potentiometers could develop into a lucrative market for U.S. exporters during the next 5 years. Transistors. — The market for transistors increased from $5.5 million in 1971 to $8.2 million in 1973 and is expected to expand an average of almost 8% 92 a year through 1977, when it should reach $11 million. Imports of transistors, which amounted to $5.3 million in 1971 and $7.7 million in 1973, are fore- cast to exceed $10 million in 1977. The United States accounted for 37%, or $2.5 million, of the country's total imports of transistors in 1972. U.S. manufacturers fill more than 50% of Swed- ish requirements for both field effect and microwave transistors. These devices are expected to be in growing demand during the next several years despite the steady displacement of transistors by integrated circuits in some product areas. The new applica- tions being developed for these transistors, especially for power types, should ensure rising demand by Swedish users. Diodes. — Swedish purchases of diodes should ap- proach $11.5 million in 1977, up from $8 million in 1973. Purchases totaled $4.3 million in 1971. Imports, which accounted for 76%, or $6.1 mil- lion, of the 1973 market, are expected to increase to nearly $8 million in 1977. Sweden's imports of diodes from the United States in 1972 totaled $1.3 million, or about 30% of total imports. U.S. ex- porters should find a good market for silicon diodes used in computers and for microwave diodes. Power rectifier diodes account for over one-third of total Swedish purchases of diodes. While growth in the market for this type of diode will be modest, sales of triacs are expected to be brisk. U.S. manu- facturers supply more than 50% of the Swedish demand for microwave diodes and more than 25% of that for silicon types. Both of these markets are expected to expand through 1977, and the U.S. position in the market should remain strong. Other electronic components. — In addition to the six components groups surveyed, good sales op- portunities will be found in Sweden for U.S. pro- ducers of the following electronic components: Swedish purchases of connectors totaled $1.3 mil- lion in 1972 and are expected to increase by 50% to almost $2 million in 1977. The growth rate for rack-and-panel type connectors should exceed that predicted for the market as a whole and may aver- age 20% annually for the 1972-77 period. Swedish purchases of optoelectronic devices, which were valued at $600,000 in 1971, are expected to accelerate markedly during 1974. It is anticipated that world production of these devices will reach a large enough scale in that year to effectively lower prices, making them more attractive to Swedish users. American manufacturers, the leading suppli- ers of optoelectronic devices to Sweden, can expect to profit from the projected rise in demand. Selected End-User Industries Swedish electronics firms are beginning to realize Sweden — The Electronics Industry Basic Data (1972) Total value of production: $912 million Number of manufacturers: 211 Industry labor force: 100,000 (approximately) Output of principal electronic component user industries (1971) — Consumer products industries: radios, television sets, and audio equipment $77.9 million photographic equipment $2.7 million Industrial/commercial equipment industries: computers and related equipment $72.8 million communications [equipment $371.3 million measuring and testing instruments $21.9 million medical electronic equipment $23.5 million a technological level of production of electronic products that will sharply raise the industry's needs for advanced componentry. Manufacturers of in- dustrial/commercial equipment are, and are ex- pected to remain, the largest users of electronic components in Sweden. The consumer products sector is another promising market for components, although its needs are not nearly as great as those of the industrial/commercial equipment sector. Although Sweden's military equipment sector has suffered from defense cutbacks in recent years, it should prove a steady customer for electronic components as the Viggen aircraft project and a new Swedish-Swiss missile program get fully under- way. The Swedish Government fosters growth in the electronics industry in two major ways. (1) It gives financial grants for academic research and develop- ment, with the goal of encouraging close cooperation between universities and businesses; (2) the Gov- ernment also invests directly in industry through Statsforetag, a State holding company. All firms, including two electronics companies, that are oart of Statsforetag operate on a profit basis. Stats- foretag actively seeks joint ventures between Swedish and foreign firms to develop and produce innovative products. Industrial/commercial equipment sector. — The Swedish industrial/commercial equipment sector in 1970 included approximately 250 firms with a total of 53,000 employees. Production in 1971 reached $510 million, up 25% from $408 million the 93 Table 1 . — Sweden: Size of market ' for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Description 1969 1971 1972 1973 1974 1977 Resistors Production2 1.2 2.3 3.0 3.4 3.9 4.1 Imports 6.7 7.2 8.8 10.9 11.3 12.5 Exports 2 .4 .6 .7 .7 .7 Market size 7.7 9.1 11.2 13.6 14.5 15.9 Capacitors Production2 7.1 9.6 14.5 19.5 22.5 34.1 Imports 5.8 6.1 7.3 9.1 10.5 15.4 Exports 2.7 3.3 4.2 7.7 10.5 17.7 Market size 10.2 12.4 17.6 20.9 22.5 31.8 Color TV picture tubes Production 2 — — — — — Imports 6.8 14.7 23.3 30.0 34.1 36.4 Exports — — — — — Market size 6.8 14.7 23.3 30.0 34.1 36.4 Diodes Production2 1 1.3 1.7 2.3 2.7 4.1 Imports 4.0 3.1 4.4 6.1 6.6 7.7 Exports .1 .2 .4 .4 .4 Market size 4.1 4.3 5.9 8.0 8.9 11.4 Transistors ■ Production - .2 .2 .5 .4 .9 Imports 6.0 5.3 6.7 7.7 8.2 10.2 Exports — — — — .1 .] Market size 6.0 5.5 6.9 8.2 8.5 11.0 Integrated circuits Production2 1.2 2.5 4.6 7.7 10.2 21.6 Imports 3.4 4.1 7.1 9.3 12.1 26.6 Exports .4 .4 .4 .9 .9 1.4 Market size 4.2 6.2 11.3 16.1 21.4 46.8 Totals Production2 9.6 15.9 24.0 33.4 39.7 64.8 Imports 32.7 40.5 57.6 73.1 82.8 108.8 Exports 3.3 4.2 5.4 9.7 12.6 20.3 Market size 39.0 52.2 76.2 96.8 109.9 153.3 1 Size of market equals production plus imports minus exports. Parts and accessories not included. - Production figures include components manufactured by OEM's for their own use only if delivered to another enterprise within the same organization. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. previous year. A 10% average annual growth rate in sector output is predicted for the 1972-77 period. The telecommunications and computer industries are by far the most important within the sector and use the largest quantities of electronic components. Demand for components, however, is not limited to these two industries. The anticipated increase in the use of electronic systems by the automotive industry, for example, should provide a considerable boost to the sector's purchases of components. AB Volvo has recently recruited 60 engineers to staff a new department for the development of automotive electronics. The company could become a substantial buyer of electronic components, particularly if it begins producing its own electronic fuel-injection and other automotive electronic systems. Telecommunications equipment. — The telecom- munications equipment industry in Sweden in 1970 comprised 98 companies employing 33,500 people. It recorded sales of $750 million in that year. Out- put of telephone equipment in 1971 reached $298 million, representing over 50% of that year's total production of industrial/commercial equipment. Production of switchboards and exchanges amounted to over $215 million in 1971; output of telephones totaled $37 million and that of carrier-current equipment reached $39 million. Sweden's telecommunications systems are tech- nologically highly developed. There are 5 million telephones in use in a completely automatic domestic network. A telecommunications satellite station will provide direct communication with most of South 94 America and Africa in 1974. Sweden built Europe's first stored-program exchange, which is located near Stockholm and has been in operation since 1968. The Swedish Telecommunications Board (STB) installed the world's first 60-mHz system over a 100-km coaxial cable between Orebro and Vasteras and recently extended it to Stockholm. Pulse code modulation (PCM) is planned now that there is a European standard of 32-channel, 8-bit speech code. Two firms, Telefon AB L.M. Ericsson Company and Televerkets Industrier (Teli), produce about 95% of the telephone equipment in Sweden. Erics- son reported 1972 sales totalling $406 million, mostly from telephone exchanges, switchboards, and telephones. The company's electronic component requirements are already substantial, and full-scale production of its new stored-program telephone ex- changes will more than double its needs during the next few years. Ericsson produces its own relays and switches, and its subsidiary, AB Rifa, makes a wide range of components, including integrated cir- cuits and other semiconductors. Although some of Ericsson's expanded component requirements will be met from either in-house manufacture or from its subsidiary, a large portion will come from other domestic and foreign sources. Teli is a manufacturing subsidiary of the Swedish Telecommunications Board (STB) and employs 3,500 people. The STB, a self-supporting Govern- ment agency with annual sales of nearly $1 billion and yearly capital investments of over $200 mil- lion, originally formed Teli to compete with Ericsson. However, the two firms now cooperate closely to avoid duplication of product lines. In 1972, Teli made 500,000 telephones and 50,000 switchboards, as well as other telephone equipment, with a total value of $65 million. The company plans to produce data transmission equipment for the domestic mar- ket by the end of this decade. Some 94% of Teli's output is for use by the STB. Telefabrikation AB (Tefab), STB's other manufacturing subsidiary, produces exchanges, transformers, and telex sets. The firm's output totaled $5.8 million in 1972. Teli's 1972 semiconductor purchases amounted to $375,000 and included selenium and zener di- odes, rectifiers, silicon transistors, and some small thyristors. Company officials estimate that in the near future about 60% of Teli's total electronic component purchases will comprise digital inte- grated circuits. These will be necessary for the new stored program exchanges that are scheduled for installation in 1977. Teli is expected to buy approxi- mately 30,000 integrated circuits annually begin- ning in 1975; most will be SSI, but some MSI will also be needed. Teli's purchases of passive com- ponents in 1972 included $620,000 worth of capac- itors and $300,000 worth of resistors. Teli makes about 10 million telephone relays a year. Standard Radio & Telefon AB (SRT), based in Vallingby, is the only U.S. subsidiary manufacturing telecommunications equipment in Sweden. SRT, al- though owned by ITT, operates independently. It has diversified its product line, branching out from the production of military equipment to include the manufacture of modems, multiplexers, and other devices for the civilian market. The other major telecommunications firms in Sweden are Philips Teleindustri AB, in Stockholm, producing radio and TV transmitters and alarm sys- tems; Aga Mobilradio AB, in Gavle, manufacturing mobile radios; and Stansaab Elektronik AB, in Jar- falla, making radar and air traffic control apparatus. The Swedish Telecommunications Board plans to replace electromechanical exchanges with Ericsson's computer - controlled stored - program exchanges. Modernization and expansion of data transmission facilities in Sweden is expected to occur over the next several years. The number of public data ter- minals should reach 19,400 in 1980, up from only 3,600 in 1972. STB's plans for the near future also include the installation of 60-mHz cable transmis- Table 2.— Sweden: Imports from the United States, and U.S. share of total imports, of selected groups of elec- tronic components, 1969-72 ' (in millions of U.S. dollars) 1969 1971 1972 U.S. share U.S. share U.S. share Description Value (percent) Value (percent) Value (percent) Resistors 1.8 27 1.1 15 1.3 14 Capacitors 1.4 24 1.1 18 1.5 21 Color TV picture tubes — 7 3 D'odes 1.4 35 \2 39 1.3 30 Transistors 3.1 52 1.7 32 2.5 37 Integrated circuits 1.3 38 1.3 32 3.0 42 Total 9.0 28 6.4 16 10.3 18 1 Parts and accessories not included. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. 95 sion, which will quadruple the firm's present ca- pacity. Computers and related equipment.— Swedish pro- duction of computers and related equipment amounted to nearly $200 million in 1972. Five firms together accounted for 60%, or $120 million, of the total output of electronic data processing (EDP) and data transmission equipment in 1972. These were: Facit-Addo, in Atvidaberg; Datasaab in Lin- koping; and L.M. Ericsson, Stansaab Elektronik AB, and Asea LME Automation, all located in Vasteras. Each of these firms specializes in the production of different types of EDP and related equipment. Facit-Addo, which is associated with AB Electrolux, produces a variety of computer peripherals, includ- ing paper tape punches, bank terminals, OCR ter- minals, magnetic tape recorders, and input devices. The company has 8,100 employees. L.M. Ericsson manufactures data communica- tions systems, including modems, concentrators, and terminals. The firm is the only Swedish supplier of specialized computers for stored-program telephone exchanges. Datasaab, part of the Saab-Scania group, has 2,230 employees. The firm concentrates on the as- sembly of medium-size, general purpose computers, bank terminals, and numerical controls, as well as the development of software. It also makes its own thick film hybrid integrated circuits. Stansaab, with 800 employees, specializes in the production of computers for air traffic control sys- tems and hospital information systems. About 30% of the company's output consists of display ter- minals, and the firm presently holds roughly 60% of the Swedish market for these products. Asea LME Automation is engaged in the produc- tion of process control systems using U.S. -manu- factured minicomputers. Asea collaborates with L.M. Ericsson and two U.S. companies in the development and manufacture of on-line real-time process and production control systems. IBM Svenska and Standard Radio & Telefon AB (SRT) are the only two U.S. manufacturing sub- sidiaries in the computer field in Sweden. IBM started full production in its new $100-million fac- tory near Stockholm in 1972 and mainly fabricates nonelectronic printers. SRT has 1,350 employees; it manufactures modems and multiplexers for data transmission. Consumer products sector. — The value of Swedish production of consumer electronic products more than doubled during the 1968-71 period, climbing from $35 million to $72 million. The sector is cur- rently enjoying a highly expansive period, caused in part by a boom in color television receiver sales. A 10% average annual growth rate is envisioned for consumer products output in the 1973-77 period. Television receivers and radios. — Output of color television receivers in 1971 reached $54 million, re- flecting a 50% annual increase from the 1968 level of $16 million. Production of color TV sets ac- counts for about 75% of Sweden's total annual dollar volume of entertainment electronic products. Production of black-and-white TV sets declined during the 1968-71 period, dropping from $13 mil- lion to '$6 million, in response to consumers' pref- erence for color TV's. Norrkopings Elektrotekniska Fabriker AB (Nefa) and Luxor Industri AB are the two major television producers in the country and employ a total of 4,000 workers. Nefa, long the dominant manufac- turer of televisions and radios in Sweden, is a sub- sidiary of the Dutch company, Philips, and one of the parent firm's three largest facilities for de- veloping and producing color TV's. Nefa has 60 engineers among its 2,000 employees. Between 1967 and 1973, it made 700,000 color TV receivers, of which 200,000 were exported. The company's cur- rent annual sales total about $65 million and com- ponent purchases are on the order of $38 million a year. Luxor has become increasingly important in the domestic market. Its annual sales and labor force are almost as large as those of Nefa. It recently completed a $4-million factory expansion program. Color televisions account for about 75% of the firm's total annual sales; monochrome TV sets, 8%; and stereophonic record players, 15%. Luxor pur- chases all of its parts from outside sources. It has had difficulty acquiring enough components to meet its requirements and is eager to find additional sources of supply. Swedish production of radios rose from $5.4 mil- lion in 1968 to $11.5 million in 1971. Nefa and Luxor are the country's two major radio manu- facturers. Audio equipment. — Swedish annual production of audio equipment has remained stable over the past several years at about $400,000. This trend, is ex- pected to continue. AB Sonab and Sinus AB are Sweden's two major companies producing audio equipment, mainly audio loudspeakers. Sonab is a Government-owned, profit-making company. Sinus, with 200 employees, manufactures automobile ex- haust systems and silencers, in addition to loud- speakers. The Competitive Environment Swedish production of electronic components within the product category in 1973 amounted to $33.4 million — more than double the 1971 level of $15.9 million — and is projected to approach $65 96 million in 1977. Domestic manufacturers of com- ponents, each with output exceeding $1 million, are: L.M. Ericsson, including its subsidiaries AB Rifa and Svenska Radio AB; Asea and its subsidiary Hafo; Datasaab; and Gylling Elektronik Produkter AB. Rifa's 1973 total output of electronic components amounted to $22 million. Capacitors accounted for about 70% of this total. Integrated circuits are expected to account for 50% of the company's annual output by 1980. Asea's $5-million compo- nent output in 1973 included thyristors, diodes, rec- tifiers, rotary switches, and GP relays. Its sub- sidiary, Hafo, manufactures MOS, custom-made semiconductors, thick film integrated circuits, and other components. Farad Electronics (Hagersten), a small company that primarily produces capacitors, is also associated with Asea. Datasaab specializes in the assembly of thick film hybrid integrated circuits used in computers. Its 1977 output is projected to reach $6 million, more than double the 1973 level. Gylling's produc- tion of printed circuit boards amounted to $1.5 mil- lion in 1973 and is expected to reach $3 million in 1977. Production of electronic components in Sweden by U.S. or other foreign firms is limited. The ITT sub- sidiary, Standard Radio & Telefon AB, manufac- tures relays for its transmission equipment and some switches for radar apparatus. The Dutch company, Philips, has a subsidiary in Sweden that makes mag- netrons for military use. Rifa, part of the Ericsson group, manufactures integrated circuits under license from U.S. firms. Rifa's production of electronic components is geared mainly to in-house require- ments of the Ericsson group. Government fosters electronics industry. — The Swedish Government encourages the development of the country's electronics industry through aid for education and research and through military con- tracts. The Government's goal is to develop a high level of technology in certain industry products, such as semiconductor devices and microwave and optical electronics, so as to enable Swedish companies to compete more effectively in international markets. The Ministry of Industry's Board for Technical Development (Stu) allocated $26 million in 1971 to universities, companies, and private organizations for research and development of 1 1 product groups, including electronic components. Stu is also collabo- rating with the Swedish Telecommunications Board on the modernization and expansion of the coun- try's data communications network. One example of a Stu grant is the $1.7 million allotted to Stan- saab for the development of a hospital patient data system during 1974-76. Saab-Scania, Svenska Radio, and Philips Teleindustri AB are among the other large electronics firms that have received R&D funding from Stu. Swedish electronic components manufacturers are actively promoting exports. For example, the ob- jective of Rifa's global marketing program is to ex- port more than 50% of its projected $35-million output of capacitors in 1977. Sweden's total exports of the six selected groups of electronic components surveyed more than doubled during the 1971-73 period, climbing from $4.2 million to $9.7 million. Exports are projected to exceed $20 million in 1977. Swedish users attach a great importance to main- taining several sources of supply for components, especially in light of the current worldwide com- ponent shortage. U.S. manufacturers of electronic components, recognized by Swedish users as world leaders in technology and design, are in an excel- lent position to achieve successful penetration of this growth market. Swedish buyers generally prefer U.S. -made products rather than those of U.S. sub- sidiaries manufacturing in Europe, although de- livery times can make this preference impractical. A number of U.S. companies are successfully marketing electronic components in Sweden. Texas Instruments, for example, maintains a sales sub- sidiary in Stockholm to negotiate contracts, a supply company in Gothenburg, and sales representatives/ distributors in Stockholm. ITT, Motorola, Semi- conductor Products, Inc., Litton Precision Products, Varian Associates, and Westinghouse are among the other American companies with sales subsidiaries in Sweden. Beckman-Helipot, Fairchild, Harris Semiconductor, National Semiconductor, and Intersil have established sales representation in Sweden. Major competitors of U.S. firms in the Swedish market for electronic components include Siemens of Germany, which is a factor in GP relays and switches, and Beyschlag in carbon resistors. Roeder- stein, another German firm, is a major source of capacitors for Swedish users. Philips is the most significant Dutch supplier of components to Sweden and offers devices ranging from metal film capacitors to integrated circuits. Three British firms successfully selling components in Sweden are Plessey (toggle switches), Sealecho (miniature connectors), and Transradio (coaxial connectors). The Danish firm, Citrohm, has made successful inroads in the market for composition and wirewound resistors. The Swiss firm Elmia has found a market in Sweden for its rotary switches, as has another firm from Switzerland, Suhner, for its coaxial connectors. The French companies, Socapax and Souriau, are active in marketing connectors. Japan, which ac- counted for only about 1% of Sweden's electronic components imports in 1972, is represented by Nippon Electric, a supplier of indicator tubes. Import duties. — Sweden's customs duty on most 97 electronic components is 5%, based on the cost, insurance, and freight (c.i.f.) value. The duty is 8.5% on capacitors, 8% on resistors, and 7% on circuit-breaking apparatus and printed circuits. Tele- vision tubes for both receivers and cameras may be imported duty-free. An appeal is expected to be made for duty exemption for other components not manufactured in Sweden. Imports from current and former European Free Trade Association (EFTA) members enter Sweden duty-free. In 1973, Sweden and the other EFTA members entered into a preferential trade agree- ment with the European Economic Community (EEC) which provides for the elimination of tariffs on industrial goods traded among these countries by 1977. Under the terms of this trade relationship, duties on industrial products (including electronic components) imported from the nine EEC member countries will be progressively reduced by 20% annually until they are completely abolished by July 1, 1977. Information on official duty rates applicable to specific types of components within the product category may be obtained from the U.S. Depart- ment of Commerce, Domestic and International Business Administration, Room 4217, Main Com- merce, Washington, D.C. 20230. Technical Requirements The electrical power supply characteristics in Sweden are 220/380 volts, single- and 3-phase, 50 hertz, four-wire. The metric system of weights and measures is the statutory standard in Sweden. Published national standards for electronic com- ponents in Sweden may be obtained through the American National Standards Institute, Inc., 1430 Broadway, New York, N.Y. 10018. The following market research study, upon which this Country Market Survey is based, is available on loan from the U.S. Department of Commerce, Do- mestic and International Business Administration, Room 1617M, Main Commerce, Washington, D.C. 20230: "The Market for Electronic Components in Sweden," DIB 74-05-506, November 1973. 98 Switzerland Switzerland's sizable output of electronic products, estimated at $1.2 billion in 1972, makes this country an attractive marketplace for U.S. manufacturers of electronic compo nents. The total Swiss market for electronic components is expected to increase 38% between 1973 and 1977, climbing from $85 million to $117 million. The rapid rate of expansion an- ticipated through 1977 in annual output of electronic products, particularly by the watch and clock segment of the electronics industry, will pro- Switzerland: Size of market for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Capacitors Resistors Transistors Integrated circuits rectifiers 21 4 ~ »" 160 0 5 10 15 20 25 1969 Q J 1973 p^| 1977 |7 j Source: U S Department of Commerce, Bureau of International Commerce market survey. vide the major impetus for this strong market growth. Switzerland's market for the selected groups of electronic components covered in this survey rose from $29.4 million in 1971 to $52.7 million in 1973, an increase of close to 80% (see table 1). The market is forecast to rise at an average annual rate of nearly 8%, reaching over $70 million in 1977. Imports averaged 62% of the total market for product category components during the 1971-73 period. The annual value of imports grew an average of 14.5% a year during that period, rising from $18.6 million to $32 million. Imports are expected to continue to account for over 60% of the market during the next 4 years and should approach a $44-million annual level in 1977. The United States has increased its share of Switzerland's import market for product category components during the past few years. U.S. exporters accounted for 42% ($9.2 million) of Swiss imports in 1972, compared with 39% ($5.5 million) in 1969 (see table 2). If American suppliers retain their current share of the import market, they can look forward to sales in excess of $18 million in 1977. Product Category Definition Electronic components covered in this survey are basically confined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product category" as used in this pub- lication is limited to these six groups of components. 99 Switzerland- -Selected Indicators 1972 Gross national product: $30.2 billion Population: 6.31 million Total country imports: $8,462 million Imports from U.S. 1 (w/share of total): $586 million (7%) Total country exports: $6,830 million Exports to U.S. (w/share of total): $594 million (9%) Exchange rate (May 1974): 2.93 S. francs= US$1 Major competitors of the United States in the Swiss market for electronic components are Ger- many, France, and Italy. Sales Opportunities A market research survey recently conducted in Switzerland for the U.S. Department of Commerce, Office of International Marketing reveals that favor- able sales opportunities exist for American exporters of the following electronic components. Transistors. — The market for transistors in 1973 totaled $9 million, up $2.1 million over 1971. It is forecast to drop to less than $7 million in 1977, when competitively priced IC's are expected to signal the end of the growth stage of the transistor life cycle. The projected decline in the market for transis- tors is expected to result in a proportional decline in imports. Demand for imported transistors is fore- cast to drop from $6.8 million in 1973 to $4.8 million in 1977. American manufacturers held the predominant share of Switzerland's import market for transistors in 1972, accounting for 74%, or $4.6 million, of the total. Swiss buyers are expected to show particular interest in low-cost silicon power transistors and silicon RF power transistors. Integrated circuits. — Sales of integrated circuits experienced the highest growth rate of any single group of components under review. Annual sales increased nearly fourfold from $2 million in 1971 to $7.9 million in 1973. Sales are expected to rise at a 20% average annual rate during the 1973-77 period, reaching $16 million in the later year. Imports in 1973 totaled $5.6 million, up more than 270% over the 1971 level of $1.5 million. Import demand in 1977 is now expected to exceed $11 million, or double the 1973 total. The United States is the dominant foreign supplier of IC's to Switzerland, commanding about two-thirds of the import market. Imports from the United States in 1972 amounted to $2 million. Sales of IC's are expected to accelerate during the 1970's as manufacturers in Switzerland's two major industries — watch manufacturing and tele- communications— step up output of products with advanced electronic systems. Other user subsectors expected to contribute to the expansion of the Swiss market for IC's are the machine tool and military equipment industries. Demand in the watch and clock industry is strongest for CMOS circuits. The industry is now evaluating the use of injector logic and bipolar and MOS circuits in electronic timing devices. Its de- cision is expected to be made soon. The use of IC's in communications and telecom- munications equipment is increasing as a result of the introduction of electronic exchange systems and of pulse code modulation (PCM) transmission equipment. Swiss producers of industrial control and instrumentation equipment have used few IC's up to the present time. However, they now are in- cluding MOS circuits in the designs of their new products. There are increasing opportunities for sales of IC's to the sewing machine industry and to the manufacturers of tape and video recorders and record players. The latter industry is a growing market for custom-made IC's, particularly bipolar and LSI circuits. Diodes and rectifiers. — Switzerland's market for diodes end rectifiers rose from $3.3 million in 1971 to $6.5 million in 1973. Based on a predicted 8.5% average annual growth rate, the market is projected to exceed $9 million in 1977. Purchases of foreign-made diodes and rectifiers account for more than 50% of the market. Total imports, valued at $1.8 million in 1971, rose to $3.5 million in 1973. Imports are expected to reach $5 million in 1977, an increase of 43% over the 1973 level. The United States is Switzerland's prin- cipal foreign supplier of diodes and rectifiers. Im- ports from the United States in 1972 amounted to $1.6 million, or 73% of the total. The highest sales potential for U.S. exporters in this segment of the market lies in high-power de- vices. While the demand for rectifiers is expected to rise in the years just ahead, the longer-term out- look for sales of diodes is not encouraging because they are being increasingly displaced by IC's. Capacitors. — -Switzerland's market for capacitors rose to $14.5 million in 1973, an increase of 62% over the 1971 figure of $9.2 million. The market is expected to more than double during the 1973-77 period, reaching over $21 million in the latter year. About two-thirds of Switzerland's requirements for capacitors are met by imports. Total imports are expected to grow an average of 10% a year, rising from $9.6 million in 1973 to $14 million in 1977. 100 The United States supplied about 12% ($800,000) of the country's annual imports in 1971 and 1972. Switzerland's industrial/commercial electronic equipment sector is expected to continue to be a major market for high-quality electrolytic capacitors. Rapidly expanding production of digital clocks and watches is expected to generate a sharp rise in demand for microvariable capacitors for tuning quartz oscillators at least through 1975. Resistors. — Swiss purchases of resistors advanced 46% from $7.1 million in 1971 to $11.7 million in 1973. Purchases are expected to reach $13 million in 1977. Imports accounted for 22%, or $3.4 million, of the 1973 market. This represented a 36% increase over the 1971 level of $2.5 million. The value of imports in 1977 is projected at $4 million. The annual U.S. share of imports averaged a modest 8% ($180,000) during the 1969-72 period. The best U.S. export sales potential lies in variable resistors. Otler electronic components. — Among the types of electronic components outside the product cate- gory that offer promising sales opportunities to U.S. exporters are connectors, relays and switches, and thyristors. Sales of connectors are expected to increase from $3.2 million in 1972 to $4.5 million in 1977. This growth will stem primarily from expanded use of modular design circuits in industrial/commercial equipment. The bulk of demand is for printed circuit and rack and panel connectors. The 1972 market for relays and switches was $2.7 million. Growing Swiss requirements are pre- dicted for switches in the lower power miniaturized range, but sales of other types of components in this group are expected to drop with the increased appli- cation of solid state devices. Thyristor sales in 1972 totaled $800,000. Good import prospects are seen for a wide range of thyris- tors, especially for those types u^d in industrial/ commercial equipment requiring high-power and high-voltage unidirectional devices. Fast thyristors to switch power supplies also offer good sales pros- pects for U.S. manufacturers. Selected End-User Industries Production in Switzerland's industrial/commer- cial electronic equipment sector totaled $300 million in 1972. The sector's output encompasses telecom- munications equipment, measuring and control in- struments, calculators, and computers and related equipment. Manufacturers expect to increase output to nearly $500 million in 1977 to meet expanding domestic and foreign demand for their products. Swiss production of consumer electronic products, excluding watches and clocks, amounted to almost Switzerland — The Electronics Industry Basic Data (1972) Total value of production (est.) $475 million Industry labor force (est.) 120,000 Output of principal electronic components user industries — Consumer products industries: radios and audio equipment $37 million photographic equipment $35 million television sets $15 million Industrial/commercial equipment industries: telecommunications equipment $159 million measuring, test, and control instruments $97 million computers and related equipment $16 million electronic desk calculators $9.5 million medical electronic equipment $9.2 million $124 million in 1972 and is expected to reach $160 million in 1977. Production of watches and clocks is forecast to exceed $1 billion in 1977, up from $708 million in 1972. The watch and clock industry is treated separately in this survey because of its unique position in rela- tion to the other subsectors of Switzerland's elec- tronics industry. The aggregate annual production value of all other industry subsectors is only about two-thirds as high as that of watch and clock pro- duction. A rapid rate of expansion from its current small base is anticipated in consumption of elec- tronic components in the watch and clock subsector. Annual consumption, estimated at $2 million in 1972, is expected to skyrocket to $50 million in 1976 and expand even more rapidly in the years thereafter. Approximately 70% of total Swiss electronic com- ponent purchases currently are made by industrial/ commercial equipment manufacturers. The consumer products sector should increase its share of com- ponents purchases from 23% to 38% by 1977. Military equipment manufacturers are expected to continue to account for about 7% of the com- ponents market. Aggregate purchases of electronic components by U.S. subsidiaries and licensees in Switzerland account for approximately 15% of the market. Watch and clock industry. — Switzerland's watch and clock industry supplies 45% of the world's watches and 4% of its clocks. Although it faces increasing competition from Russia and Japan, the Swiss industry is expected to maintain its current 101 Table 1. — Switzerland: Size of market1 for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Description 1969 1971 1972 1973 1974 Resistors Production2 7.4 9.2 10.6 15.8 16.5 Imports 1.8 2.5 2.5 3.4 4.0 Exports 3.5 4.6 5.1 7.5 8.1 Market size 5.7 7.1 8.0 11.7 12.4 Capacitors Production2 4.4 5.4 6.2 9.0 10.0 Imports 5.6 6.7 6.4 9.6 10.5 Exports 2.2 2.9 3.0 4.1 4.5 Market size 7.8 9.2 9.6 14.5 16.0 Color TV picture tubes Production — — — — — Imports .5 .9 1.8 3.1 3.8 Exports — — — — — Market size .5 .9 1.8 3.1 3.8 Diodes and rectifiers Production2 2.3 3.1 3.7 6.0 7.0 Imports 1.5 1.8 2.2 3.5 4.2 Exports 1.2 1.6 1.9 3.0 3.4 Market size 2.6 3.3 4.0 6.5 7.8 Transistors Production2 2.6 3.3 3.6 4.5 4.0 Imports 3.7 5.2 6.2 6.8 6.1 Exports 1.3 1.6 1.8 2.3 2.0 Market size 5.0 6.9 8.0 9.0 8.1 Integrated circuits Production2 1.0 2.0 4.5 6.5 Imports 1.0 1.5 2.7 5.6 7.8 Exports — .5 1.0 2.2 3.3 Market size 1.0 2.0 3.7 7.9 11.0 Totals Production2 16.7 22.0 26.1 39.8 44.0 Imports 14.1 18.6 21.8 32.0 36.4 Exports 8.2 11.2 12.8 19.1 21.3 Market size 22.6 29.4 35.1 52.7 59.1 1977 17.1 4.0 8.1 13.0 14.0 14.0 6.6 21.4 4.8 4.8 8.1 5.0 4.1 9.2 3.4 4.8 1.7 6.5 10.0 11.2 5.2 16.0 52.6 43.8 25.7 70.7 1 Size of market equals production plus imports minus exports. Parts and accessories not included. 2 Production figures do not include components manufactured by OEM's for their own use. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. share of the market in the years just ahead. It pro- duced about 80 million units in 1972, and these were valued at $708 million. Approximately 97% of production was exported. Production in 1977 is expected to increase to 90 million units, worth close to $1.1 billion. The industry is expected to become a major pro- ducer of electronic watches and clocks by 1975. Current production includes: • Clocks and watches with conventional face and me- chanical balance or tuning fork, using simple elec- tronic voltage stabilization and drive components (about 2 million units annually) • Clocks and watches with either a conventional face or mechanical digital readout, oscillating quartz, and a divider IC (about 50,000 units, principally watches) • Clocks and watches with digital readout (liquid crystal or light-emitting diodes), quartz, divider, and decod- ing and drive IC's (production is still very small) Output of electronic timepieces will grow rapidly once the industry solves certain technical problems. For instance, it must develop a method to mass- produce the low-frequency quartz and increase its resistance to shock. The industry currently uses an oscillating quartz with 32,768 hertz. This is expected to change when dividers made for higher frequencies and low-power consumption become available. Swiss watchmakers are highly dependent on the United States for the advanced technology required for production of solid state quartz watches. They have imported the necessary IC's and watch kits from Texas Instruments, Motorola, RCA, Microma Universal, Intersil, Solid State Scientific Devices, and Optel. Switzerland's Huer-Leonidas, in Biel, uses Sperry Rand displays for solid state digital timers. Swiss watch manufacturers and research organiza- 102 tions keep in close contact with the U.S. companies in a continuing effort to improve the technological development of their production. The watch and clock industry comprises primarily many small factories. A 1971 study counted 1,163 factories employing 69,431 workers. Over 1,000 of these had fewer than 100 employees and only 4 factories employed in excess of 1,000 persons. The industry is organized into numerous associa- tions, federations, and societies. The most influential association is the Chambre Suisse de l'Horlogerie (CSH), which represents the entire watch and clock industry in governmental and foreign trade matters and acts as a coordinating body for the other major federations and associations. The Societe Suisse pour l'lndustrie Horlogere (SSIH) is the largest pro- ducers' organization. The Centre Electronique Horloger (CEH) serves as an independent research organization for the development of electronic movements. Manufac- turers subscribe to CEH and use the products it develops as the basis for their own production. How- ever, this does not preclude the larger firms from pursuing their own R&D programs. Ebauches S.A., in Marin, is a central holding company whose subsidiaries make piece-parts and watch movements. It has a research division that is developing electronic watches and owns a firm, Oscilloquartz S.A., in Neuchatel, that manufactures quartz crystals for a wide variety of timing devices, including electronic watches. The firm of Bernard Golay S.A., in Lausanne, is a major producer of quartz clocks and watches. It has developed production of electronic watches and sold its know-how to both Ebauches S.A. and Lon- gines S.A., in St. Imier. Bernard Golay has a joint venture in India for the production of electronic watches and also contemplates setting up production facilities in the United States. Two Swiss companies, Le Portescap S.A. and Arthur Imhof, have jointly developed the smallest quartz clock movement now on the market. It con- sists of a battery, quartz, electronic frequency di- vider, control circuit, transductor, step motor, and clockwork. Other major Swiss manufacturers of quartz clocks and watches include: Omega (Louis Brandt & Frere S.A.), in Biel; Jaeger le Coultre & Cie, Geneva; So- ciete de Garde-Temps, Girard Perregeaux, and Longines. The Bulova Watch Co., Inc., which opened its Ateliers Division in Biel after World War I, is the only important U.S. subsidiary manufacturing watch- es and clocks in Switzerland. Bulova is one of Switz- erland's leading producers of tuning fork watches. The company has a factory in Neuchatel that mainly produces Accutron watches. Bulova has a production capacity in Switzerland of approximately 2 million watches and clocks a year. The Societe Suisse pour l'lndustrie Horlogere (SSIH) has bought a majority holding in two well- known American companies, Hamilton Watch Cor- poration and Sheffield Watch Corporation. It also has undertaken a joint venture with the U.S. firm Intersil to produce COS/MOS circuits and liquid crystal displays in Germany. Industrial/ commercial equipment sector. — Despite constraints on production created primarily by labor shortages, Swiss manufacturers of industrial/com- mercial electronic equipment expect to expand their output at an average annual rate of almost 5% through 1977. Modern automated production meth- ods are being increasingly emphasized by these man- ufacturers in their efforts to alleviate the labor shortage problem and improve productivity. The sector employs an estimated 35,000 workers. Telecommunications equipment. — Swiss telecom- munications equipment production in 1972 totaled $129 million, about 43% of total sector output. Ex- ports were $37 million. The bulk of telecommunica- tions equipment is sold to the Swiss Posts, Tele- Table 2. — Switzerland: Imports from the United States, and U.S. share of total imports, of selected groups of electronic components, 1969-72 ' (in millions of U.S. dollars) 1969 1971 1972 U.S. share U.S. share U.S. share Description Value (percent) Value (percent) Value (percent) Resistors 140 8 200 8 200 8 Capacitors 700 12 800 12 800 12 Color TV picture tubes — — — — 3 * Diodes and rectifiers 1,100 73 1,300 72 1,600 73 Transistors 2,800 76 3,900 75 4,600 74 Integrated circuits 740 74 1,100 73 2,000 75 Total 5,480 39 7,300 39 9,203 42 1 Parts and accessories not included. * Less than 0.5%. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. 103 phone, and Telegraph (PTT) authority, and there- fore is made to its specifications. Hasler AG, of Berne, with about 50% of the market, dominates the industry. Standard Telephon und Radio AG (STR) and Siemens- Albis AG, both located in Zurich, are the other major telecommuni- cations equipment producers. Hasler products in- clude private and public telephone exchanges, carrier frequency and PCM transmission systems, and telex transmission and switching systems. Hasler also makes components, primarily for its own use. These include HF-coils, wirewound resistors, connectors, DTL integrated circuits, Ge-transistors, and me- chanical relays. Hasler has developed a number of technologically advanced electronic products, such as computerized telex exchanges and solid state telephone exchanges. Under a project managed by the PTT, it has been associated with Siemens-AIbis and STR in develop- ing a PCM transmission system that is expected to be less expensive than the traditional carrier fre- quency system. STR's current production of telecommunications equipment is limited to telephone exchanges for the PTT. It supplies an estimated 75% of the PTT's requirements. STR exports less than 10% of its total annual production. It is a subsidiary of ITT and the only U.S. subsidiary producing telecom- munications equipment in Switzerland. It buys about 40% of its components through ITT and produces small quantities of relays and capacitors for its own needs. Measuring, test and control equipment. — The measuring, test, and control instrument industry is the second most important industrial/commercial equipment subsector in terms of size and growth potential. Its production growth rate is expected to exceed 9% annually between 1972 and 1977. Pro- duction was valued at $97 million in 1972 and is projected to reach $166 million in 1977. Control instruments make up the largest part of the in- dustry's production. Rapid growth in the domestic market for this equipment is anticipated, since a large share of production is purchased by two of Switzerland's more dynamic industries — precision instruments and chemicals. Exports of control in- struments also are expected to expand rapidly in the years just ahead. Communications equipment. — Swiss communica- tions (radio communications, radar and navigation aids, and public broadcasting) equipment output is expected to grow from $30 million in 1972 to over $40 million in 1977 and expand even more rapidly in the years thereafter. The communications equipment industry also has excellent prospects for export growth. The industry's major manufacturers are AG Brown, Boveri & Cie of Baden and Auto- phon AG of Solothurn. Computers and related equipment. — Swiss manu- facturers produce some computers, electronic desk calculators, and related equipment. Total production was worth $26 million in 1972 and should reach approximately $50 million in 1977. Production of electronic calculators is expected to rise from 42,- 000 units in 1972 to about 70,000 units in 1977. Most of Switzerland's computers are imported. During the period 1973-77, Switzerland is expected to import over $835 million worth of computers and related equipment, with U.S. exporters supply- ing more than $250 million of this market. There is one important Swiss manufacturer of mainframes, Paillard, in Yverdon. Paillard recently began pro- duction of a digital computer called the "Hermes Data System 210," which is similar to the NCR 399. NCR has a subsidiary in Bulach, near Zurich, which manufactures computer peripherals for both the Swiss market and worldwide distribution. Zell- weger, of Uster, a maker of communications and control equipment, has developed a point-of-sale system that could lead to increased output of com- puters when it is put into production around 1975. Medical electronic equipment. — Switzerland's pro- duction of medical electronic equipment amounted to $9.2 million in 1972 and should reach $19 million in 1977. Consumer products sector. — The principal users of electronic components in Switzerland's consumer products sector are the manufacturers of audio equipment, domestic appliances, and photographic equipment. The sector employs approximately 5,000 workers. Both labor shortages and an influx of consumer products from countries with low cost labor have slowed production growth in this sector. The sophis- ticated radio and audio equipment industry is an ex- ception, however; its average annual rate of growth is expected to continue to be 9% through 1977. Radios and audio equipment. — Production of ra- dios and other audio equipment was about $37 mil- lion in 1972 and could exceed $62 million in 1977. Practically all radios are imported, but the firm of Willi Studer, in Regensdorf, makes some high- quality stereo and high-fidelity radio receivers, as well as tape recorders and high-fidelity amplifiers, under the brand name "Revox." The company ex- ports a considerable amount of its production to the United States. Lenco AG Plattenspielerfabrik, of Oberburg, makes record players that have sold well throughout Europe. Kudelski S.A., in Cheseaux, produces pro- fessional tape recorders. Its annual sales are about $4 million. Kudelski's president, Stefan Kudelski, was awarded an Oscar by the American film indus- try and was given the Samuel L. Warner gold medal for his Nagra miniaturized pre -us jnal tape record- ers. 104 Domestic appliances. — Swiss production of do- mestic appliances includes mixers, vacuum cleaners, washing machines, electric cooking appliances, dim- mers, and sewing machines. The value of production was $37 million in 1972 but is expected to drop to about $34 million in 1977. It is generally a small market for components; purchases include low-cost thyristors and triacs. The sewing machine industry, however, should have expanding requirements for electronic components during the next four years. The two leading sewing machine makers in Switzer- land are Fritz Gegauf, Ltd. (Bernina brand) in Steckborn and Tavaro AG (Elna brand) in Geneva. Photographic equipment. — Photographic equip- ment made in Switzerland includes picture and movie cameras, projectors, electronic flash equip- ment, and photocopiers. Domestic production, which reached $35 million in 1972, is meeting heavy com- petition from imports, particularly from Japan. It is expected to remain at about the same level during the next 5 years. Television receivers. — Philips N.V. closed its tele- vision receiver assembly plant in La Chaux-de- Fonds in early 1973. This virtually ended Switzer- land's TV equipment production with the exception of special custom and closed circuit television prod- ucts. Output in 1972 was worth $15 million. Studer and Lenco have discussed arrangements with the German firm AEG-Telefunken to produce television disc players, but labor shortages will probably in- hibit production. Military equipment sector. — Although it is small, the military equipment sector in Switzerland should not be overlooked as a market for electronic com- ponents. Several electronic equipment manufacturers produce military equipment in addition to other product lines. Military communications equipment is manufactured by Zellweger, Landis & Gyr in Zug, Siemens-Albis, and Autophon. Adolph Saurer AG in Arbon and Mowag Motorenfabrik AG in Kruez- lingen manufacture a variety of civilian and military vehicles and equipment. Contraves AG, associated with Werkzeugmaschin- enfabrik Oerlikon-Buehrle AG, develops munitions that are reportedly manufactured by its licensees abroad. It operates a standards agency in Zurich, however, and its choice of components for use in its manufacturing operations is largely based on what is available in the Swiss market. The Competitive Environment The strength of Switzerland's domestic electronic components industry lies chiefly in producing the more conventional passive components, including re- sistors, capacitors, relays and switches. Domes- tic production of the six groups of components cov- ered in this survey is expected to double from $26.1 million in 1972 to approximately $52 million in 1977. Production in 1973 was valued at $39.8 million. Exports of components within the product cate- gory rose from $12.8 million in 1972 to $19.1 mil- lion in 1973. Swiss trade sources predict an average annual export rate of nearly 5% between 1974 and 1977. Exports in 1977 are expected to amount to nearly $26 million. Only three companies — Faselec S.A., Transistor AG, and Hasler AG — produce transistors and IC's in Switzerland. They supply about 8% of Swiss re- quirements, which totaled almost $12 million in 1972. The market for these advanced components will probably continue to be supplied primarily by American firms from their U.S.- and European- based manufacturing facilities. Switzerland's largest manufacturer of semiconduc- tor devices is Faselec S.A., of Zurich; it employs 300 persons. The company is owned jointly by Philips of the Netherlands, AG Brown, Boveri & Cie and other Swiss watchmakers. It makes instruments and watch components for Philips and for domestic watchmak- ers. Faselec specializes in the production of linear type IC's and custom circuits. It turns out some 125 million transistors annually. About 80% of this out- put is sold on the open Swiss market, about 10% goes to Faselec's partners in Switzerland, and the rest is absorbed in foreign markets by the Philips group. Transistor AG, in Zurich, a subsidiary of Ray- theon, produces custom IC's and transistors, as well as diodes, rectifiers, and thyristors. Most of its lim- ited output is sold to domestic users. The Swiss firm Hasler AG makes semiconductor devices primarily for its own use. Standard Telephon und Radio AG (STR) pro- duces capacitors, relays, and switches to serve its production needs. Metallux Elektronik AG in Chi- asso (a subsidiary of the Italian company Mial) manufactures resistors, capacitors, and attenuation links for the Swiss market. Swiss producers of relays and switches include: Elesta AG Elektronik in Bad Ragaz, W.G. Erni in Ostermundingen, Ghielmetti AG in Solothurn, E. Jucker Relaisbau in Zurich, Lechmann und Muh Elektronik in Gumlingen, Micronel AG in Tagels- wangen, Zettler-Elektro-Apparate AG in Nafels, Hasler AG, and Landis & Gyr. The leading resistor manufacturers are: Contelec S.A. in Bienne; Ohmag in Neuchatel; Pryor Elec- tronic S.A. in Ecublens; Hasler AG and Metallux Elektronik AG. Among the major manufacturers of capacitors are: Condensateurs Fribourg S.A., Fri- bourg; Leclanche S.A., Yverdon; Standard Telephon und Radio AG; and Micafil AG, Zurich (a Brown, Boveri & Cie subsidiary). Diodes and rectifiers are manufactured by Compagnie pour l'lndustrie Radio- 105 technique, in addition to Transistor AG. The Swiss do not make color TV picture tubes. Major foreign suppliers of components to Switzer- land are: Germany's AEG-Telefunken, Klockner- Moeller, Semikron, Siemens, Tungsram, and Zettler; Holland's Philips; Italy's Mial; Britain's Morganite; and Belgium's Burndy. U.S. firms active in Switzerland's electronic com- ponents market include Honeywell, ITT, Litton, RCA, Texas Instruments, TRW, Sprague, Union Carbide, Hewlett-Packard, Sperry Rand, Raytheon, Teledyne, and Motorola Semiconductors. Switzerland is a member of the European Free Trade Association (EFTA) and the General Agree- ment on Tariffs and Trade (GATT), and has a preferential trade agreement with the European Eco- nomic Community (EEC). No duties are levied on imports of electronic components from EFTA mem- bers— Norway, Iceland, Portugal, Sweden, and Aus- tria— or from the United Kingdom, Denmark, or Finland. Import duties. — Duties imposed on component imports from non-EFTA countries range from 100 SwF to 200 SwF per 100 kilograms. As of January 1, 1974, all electronic component imports are as- sessed a tax of 6.6% of the frontier-crossing value. This tax is also imposed on the value of domestically produced components. An additional statistical tax of 3% is charged on all dutiable imports. Information on official duty rates applicable to specific products within the product category may be obtained from the U.S. Department of Commerce, Domestic and International Business Administration, Room 4217, Main Commerce, Washington, D.C. 20230. Technical Requirements The electrical power supply characteristics in Switzerland are 220/380 volts, 50 hertz, single- or 3-phase. Plugs are 2-wire, 3-wire, and 3-wire/ ground types. All electrical equipment operating from a power line must bear the mark of approval of the Swiss Electrical Association (Schweizer Elek- trotechnissher Verein — SEV). Customs officials are instructed to report any imported electrical equip- ment that does not bear this mark. The SEV offices are located at Seefeldstrasse 301, 8008 Zurich. The metric system of weights and measures is the statutory standard in Switzerland. Published national standards for electronic com- ponents in Switzerland may be obtained through the American National Standards Institute, Inc., 1430 Broadway, New York, N.Y. 10018. The following market research study, upon which this Country Market Survey is based, is available on loan from the U.S. Department of Commerce, Do- mestic and International Business Administration, Room 1617M, Main Commerce, Washington, D.C. 20230: "The Market for Electronic Components in Switz- erland," DIB 74-03-502, November 1973. 106 Taiwan Taiwan: Size of market for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Transistors Taiwan's swiftly expanding electronics industry, fueled by foreign investment and sup- ported by the Government, is stimulating vigorous growth in demand for electronic compo- nents. Industry output of finished electronic products rose from $301 million in 1972 to about $360 million in 1973, a gain of approximately 20%. Production is expected to con- tinue increasing at an average rate of 20% a year, approaching $765 million in 1977. The Taiwan market for the selected groups of electronic components covered in this survey should keep pace with the overall industry expansion. Purchases of these components, which totaled $107.7 million in 1973, are projected to rise, at an average annual rate of 18%, to more than $210 million in 1977 (see table 1). Sharp increases in purchases took place in the 1969-72 period, when sales climbed from $28.4 million to $78.7 million. Annual imports of the six groups of components surveyed almost doubled between 1971 and 1973, rising from $29 million to $54 million. Imports are expected to expand at an average yearly rate of 11% from the 1973 level to nearly $82 million in 1977. The U.S. share of the Taiwan import market for product category components increased from 12% ($3.4 million) in 1971 to 18% ($7.2 million) in 1972 (see table 2). American manufacturers will find Taiwan to be an increasingly attractive market in the years ahead, as the country's electronics firms seek to upgrade product quality through the more extensive use of advanced electronic components. The most significant third-country firms supplying electronic components to Taiwan are Japanese. Sales Opportunities Manufacturers of finished electronic products in Capacitors Color TV picture tubes 0 10 20 30 40 50 60 70 1969 Q"~| 1973 E^l 1977 JT Source: U.S. Department ot Commerce, Bureau of International Commerce market survey. Product Category Definition Electronic components covered in this survey are basically confined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product category" as used in this pub- lication is limited to these six groups of components. 107 Taiwan — Selected Indicators (1972) Gross national product: $7.7 billion Population: 15.3 million Total country imports: $2.5 billion Imports from U.S. (w/share of total): $543 million (22%) Total country exports: $3 billion Exports to U.S. (w/share of total): $1.3 billion (42%) Exchange rate (May 1974): 37.88 new Taiwan dollars=US$l Taiwan are eager to diversify their sources of supply for electronic components and are looking particu- larly to the United States for devices not readily available from local factories. Propitious conditions favoring accelerated purchases of American-made electronic components are being reinforced by the policy of the Government of the Republic of China (ROC) to encourage imports from the United States in order to bring trade between the two nations into balance. Taiwan's television receiver and radio industries, which in value terms account for roughly 67% and 16%, respectively, of the country's total output of electronic end products, will require increasing quantities of components as they continue their rapid expansion. In addition, manufacturers of calculators are expected shortly to become significant buyers of electronic components needed to maintain their swiftly rising production. A market research survey recently conducted in Taiwan for the U.S. Department of Commerce, Office of International Marketing reveals that favor- able sales opportunities exist for American exporters of the following electronic components: Transistors. — Taiwan's market for transistors ad- vanced more than 60% from 1971 ($18.6 million) to 1973 ($30 million). Sales are projected to in- crease at an average annual rate of better than 20% during the 1973-77 period, reaching $66 mil- lion in the latter year. Imports, which accounted for $11 million, or 37% of the 1973 market, are forecast to rise to $16 million in 1977. Purchases of U.S. -origin transistors in 1972 amounted to $500,000, accounting for ap- proximately 7% of that year's $7-million import market. Taiwan is currently experiencing a severe short- age of transistors. Although efforts are underway to increase domestic production, manufacturers will continue to rely heavily on imports to fill their rapidly expanding requirements. The best prospects for U.S. exporters lie in silicon transistors, both small signal and n-p-n power types. American-made germanium power transistors will also be in demand. Capacitors. — The capacitor market nearly tripled during the 1971-73 period, rising from $10.4 mil- lion to $29 million. The market is expected to reach an annual volume of $38 million in 1977. Taiwan's purchases of capicitors from abroad totaled $20 million in 1973; this level should be maintained through 1977. Purchases from the United States in 1972 amounted to $4.8 million, a 31% share of that year's $15.5-million import market. Taiwan's market for capacitors is expected to grow with the increased output of television sets and radios. A typical television receiver produced in the country contains 50 ceramic capacitors, 25 mylar capacitors, and 25 electrolytic capacitors; a radio typically incorporates 15 ceramic capacitors, 2 mylar capacitors, and 3 electrolytic capacitors. The following capacitors should be in high demand: • Fixed paper capacitors • Fixed film capacitors • Fixed ceramic capacitors • Fixed electrolytic capacitors • Variable capacitors Resistors. — Purchases of resistors in Taiwan went up from $6.3 million in 1971 to $20 million in 1973, a more than threefold increase. The annual market is expected to climb to almost $39 million in 1977. Imports of resistors were valued at $7.5 million in 1973 and should rise moderately to $9 million in 1977. Purchases of resistors from the United States amounted to $259,000 in 1972, representing 4% of the import market. Demand for resistors should remain high, in line with the expected continued growth of consumer electronics production. Television receivers produced in Taiwan generally contain approximately 120 re- sistors and radios in most cases incorporate about 30. Types of resistors offering promising sales pros- pects for American exporters include: • Variable wirewound resistors • Fixed composition resistors • Fixed film resistors • Fixed wirewound resistors Carbon resistors are generally supplied by local manufacturers, but Taiwan's expanding requirements for special wirewound or precision resistors should be met largely by imports, mainly from the United States. Integrated circuits. — Sales of integrated circuits in Taiwan experienced the highest growth rate, of any single group of components within the product category during the 1971-73 period, rising from a modest level of $2 million to $10.9 million. The 108 market is expected to increase at an average annual rate of about 33% between 1973 and 1977, reach- ing almost $35 million in the latter year. Imports are expected to grow an average of more than 65% a year, going from $1.9 million in 1973 to nearly $15 million in 1977. The United States, by far Taiwan's leading foreign supplier of inte- grated circuits, held a 79% share of the 1972 import market. Purchases of U.S. -made integrated circuits amounted to $710,000 in that year. The color television receiver and calculator in- dustries will represent the principal growth markets in Taiwan for integrated circuits during the next 5 years. U.S. technological superiority in integrated circuits should continue to give American manufac- turers a competitive edge in this segment of the market. The following types of IC's present the best sales opportunities for U.S. manufacturers: • Monolithic digital integrated circuits • Hybrid integrated circuits • COS/MOS digital integrated circuits • Linear integrated circuits Diodes and rectifiers. — Taiwan's expenditures for diodes and rectifiers doubled from $5.4 million in 1971 to $10.8 million in 1973. Sales of these devices are expected to follow the steady upward growth trend of the electronics industry as a whole. Pro- jected increases, averaging more than 20% a year, should result in a 1977 market of $24 million. Imports accounted for 61%, or $6.6 million, of the 1973 market. The import market is expected to advance 82% during the 1973-77 period, reaching $12 million in the latter year. Purchases of diodes and rectifiers from the United States in 1972 ac- counted for $875,000, or 16% of the $5.5-million import market. The country's electronics producers will continue to look to the United States for a variety of ad- vanced diodes and rectifiers which local producers are not in a good position to supply. Power recti- fiers, zener diodes, and silicon rectifier diodes are considered as having the best sales prospects for U.S. suppliers during the next 5 years. Color TV picture tubes. — Taiwan's consumption of color TV picture tubes is anticipated to advance about 43% from $7 million in 1973 to $10 million in 1977. Purchases totaled $3 million in 1971. Because there is no significant local production of color TV picture tubes in Taiwan, the country's manufacturers of color TV receivers are virtually dependent on imports to fill their tube requirements. Although Japan is presently Taiwan's largest supplier of color TV picture tubes, imports from the United States amounted to $238,000 in 1971, or 8% of the import market. Purchases of these tubes from U.S. firms were minimal in 1972. How- ever, they are expected to increase appreciably in the next few years, as several consumer electronics Taiwan — The Electronics Industry i Basic Data (1972) Total value of production (est.): $460 million Number of manufacturers: 425 Industry labor force: 122,082 Output of principal electronic components user industries — Consumer products industries: television sets $201 million radios $49 million phonographs $4 million tape recorders $13 million calculators $12 million Industrial/commercial equipment industries: telephones $2 million switchboards $6 million companies in Taiwan are considering the production of color TV's for export to the United Kingdom and, possibly, the United States. Other electronic components. — U.S. suppliers should find excellent sales opportunities in Taiwan for a number of electronic components outside the product category. A sizable market is emerging for special semiconductor devices, such as light-emitting diodes (LED's), photosensors, and thermionic de- vices. In 1972, this market was valued at $2.8 million. Demand for LED's and other electronic display devices will rise substantially as a result of expanded production of calculators. Connectors, switches, and inductors will also be in demand. Interest is growing in high-quality con- nectors and innovative switching devices for use in radios and radio/phonograph/tape recorder combi- nations. Sales of connectors amounted to $9 million in 1972; relays and switches, $26 million; and in- ductors, $48 million. Selected End-User Industries Taiwan's 217 manufacturers of finished electronic products employed a total of 52,082 persons in 1972. Their aggregate output in that year exceeded $301 million. The consumer products sector ac- counts for approximately 97% of the country's total output of finished electronic products. This sector purchases the bulk of the electronic com- ponents consumed in Taiwan. The industrial/com- mercial equipment sector accounted for a modest 2.9% share of total 1972 output of finished elec- tronic products. The sector's production is confined to a limited line of telecommunications equipment. The ROC Government's long range develop- ment plan for the electronics industry (1973-83) emphasizes the importance of growth in the coun- 109 Table I . — Taiwan: Size of market ' for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Description 1969 1971 1972 1973 1974 1977 Production2 1.0 2.0 7.0 12.8 15.0 30.0 Imports 3.8 4.5 7.0 7.5 8.0 9.0 Exports — .2 .2 .3 .4 .4 Market size 4.8 6.3 13.8 20.0 22.6 38.6 Capacitors Production- 7.3 8.2 12.4 18.0 20.0 30.0 Imports 3.9 11.2 15.5 20.0 21.0 20.0 Exports 5.0 9.0 9.5 9.0 9.0 12.0 Market size 6.2 10.4 18.4 29.0 32.0 38.0 Color TV picture tubes Production — — — — — — Imports 1 3.0 5.1 7.0 8.0 10.0 Exports — — — — — — Market size I 3.0 5.1 7.0 8.0 10.0 Diodes and rectifiers Production2 5.0 7.5 11.0 13.0 18.7 41.2 Imports 3.8 4.4 5.5 6.6 7.9 12.0 Exports 4.0 6.5 7.5 8.8 13.5 29.6 Market size 4.8 5.4 9.0 10.8 13.1 23.6 Transistors Production2 7.9 14.4 22.5 22.0 31.0 60.0 Imports '. 4.5 5.5 7.0 11.0 10.2 16.0 Exports 9 1.3 2.0 3.0 4.2 10.0 Market size 11.5 18.6 27.5 30.0 37.0 66.0 Integrated circuits Production2 9.0 19.6 37.0 52.0 64.0 120.0 Imports * .4 .9 1.9 3.6 14.8 Exports 8.0 18.0 33.0 43.0 50.0 100.0 Market size. 1.0 2.0 4.9 10.9 17.6 34.8 Totals Production2 30.2 51.7 89.9 117.8 148.7 281.2 Imports 16.1 29.0 41.0 54.0 58.7 81.8 Exports 17.9 35.0 52.2 64.1 77.1 152.0 Market size 28.4 45.7 78.7 107.7 130.3 211.0 1 Size of market equals production plus imports minus exports. Parts and accessories not included. 2 Production figures include components manufactured by OEM's for their own use. In-house production of resistors represents 11% of the total; capacitors, 8%; diodes and rectifiers, 8%; transistors, 8%; and integrated circuits, 12%. * Less than $50,000. Source: U.S. Department of Commerce. Bureau of International Commerce market survey. try's consumer electronics industry. The plan fosters the production of components and parts necessary to manufacture such consumer products as tele- visions, radios, stereos, and desk calculators in order to build a firm foundation for the country's elec- tronics industry as a whole. The goals of the plan also include the development and manufacture of more sophisticated electronic instruments and com- munications equipment. The Government offers a number of incentives to industry, such as exemptions from corporate taxes or accelerated depreciation of fixed assets. In addi- tion, capital equipment may be exempted under certain conditions from import duties; import tariffs on raw materials paid by export industries may also be refunded. Foreign investment generally is encouraged by the Government. Of the $85 million in foreign in- vestments approved during the first half of 1973, ap- proximately one-fourth ($21 million) was committed to the electronics industry. Consumer products sector. — The consumer prod- ucts sector of Taiwan's electronics industry in 1972 comprised 207 factories, with employment totaling some 50,000. The sector's annual output amounted to $292 million in 1972 and is expected to surpass $680 million in 1977. Taiwan's television receiver industry accounted for 72% of the sector's total production in 1972. The radio industry contributed 18% of sector output in the year, and the tape recorder industry 5%. Pro- duction of calculators, only minimal at the beginning 110 of this decade, represented 4% of the sector's total 1972 output. Television receivers. — The television receiver in- dustry in Taiwan comprises 26 factories, employing a total of 21,000 people. Output was valued at $201.1 million in 1972. Production of TV sets in- creased an average of 1 1 1 % a year during the 1966- 72 period, rising from 66,000 sets to 3.6 million sets. About 500,000 color TV sets were made in 1972. Four of the country's leading television receiver manufacturers are subsidiaries of U.S. firms: RCA Taiwart, Ltd., Taipei; Admiral Overseas Corpora- tion, Taipei County; Zenith Taiwan Corporation, Tao Yuan County; and Motorola Taiwan Electronics Corporation, Taipei County. RCA is Taiwan's largest producer of TV sets, accounting for 20% of total annual production. The company, employing some 5,000 persons, makes TV components and integrated circuits, in addition to television receivers. Admiral, which accounts for about 12% of Taiwan's television receiver output, employs over 2,000 people in the manufacture of both mono- chrome and color TV sets. Zenith, with some 2,000 employees, contributes approximately 9% of the country's total TV set production, while Motorola's share of overall production is 2%. Motorola's 900 employees make radios, phonographs, tape record- ers, and video tape recorders, in addition to tele- vision sets. Other major manufacturers include the Tatung Company; Sanyo Electric (Taiwan) Co., Ltd., and Matsushita Electric (Taiwan) Co., Ltd., all head- quartered in Taipei. Tatung Company, Taiwan's largest producer of consumer electronic products, holds the second largest share (13%) of TV set output. The com- pany only recently began to export black-and- white and color televisions under its own name and Table 2. — Taiwan: Imports from the United States, and U.S. share of total imports, of selected groups of electronic components, 1969-12 ' (in thousands of U.S. dollars) 1971 1972 U.S. share U.S. share Value (percent) Value (percent) Resistors 214 5 259 4 Capacitors 336 3 4,854 31 Color TV picture tubes 238 8 — — Diodes and rectifiers .. 2,000 46 875 16 Transistors 375 7 500 7 Integrated circuits 280 70 710 79 Total 3,443 12 7,198 18 1 Parts and accessories not included. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. is striving for annual exports of 60,000 color and 150,000 monochrome receivers to the United States by 1977, including private label as well as Tatung brands. Taiwan's television receiver industry is geared to the international market; about 88% of its annual production is exported. Exports of monochrome televisions to the United States alone amounted to 2.7 million sets in 1972. Sanyo is reportedly selling about 10,000 color TV sets a month to the United States. Expanding overseas markets, coupled with rising domestic demand, should ensure a healthy future for Taiwan's manufacturers of television sets. Output is expected to grow at a yearly rate of be- tween 15 and 25% through 1977. Radios. — There are 83 firms, with a total of 17,335 employees, engaged in the manufacture of radios iff Taiwan. Output by these companies rose from 4.3 million radios in 1971 to 6.1 million in 1972, a 41% increase. Production of radios in the latter year was valued at $48.7 million. U.S. subsidiaries manufacturing radios in Taiwan include Arvin (Taiwan) Ltd., in Tao Yuan County; Bendix Taiwan, Ltd., in Tao Yuan County; Mo- torola; Philco-Ford Taiwan Corporation, in Taipei County; Trans-World Electronics (Taiwan), Ltd., in Taipei County; Leco Electronics Corporation in Taipei; and Taiwan Hi-Sonic Co., Ltd., in Taipei. Taiwan's radio manufacturers, like the TV set producers, are export-oriented; over 50% of their total annual output is sold in foreign markets. Ex- pansion of production is expected to continue in response to rapidly rising domestic and international demand for solid state radios. The Funai Electric Company, for example, will begin construction in 1974 of a $300,000 plant for the manufacture of transistor radios. Other consumer products. — There are some 40 firms in Taiwan manufacturing tape recorders and 15 companies making phonographs. Total output of tape recorders reached 779,000 units valued at $12.8 million in 1972. The 1972 level represents a 131% increase over the 337,000 tape recorders produced in 1971. Phonograph production experi- enced more than a 65% average yearly increase in the 1966-72 period, rising from 9,000 units to 199,000 units. The value of the 1972 output was almost $4 million. The tape recorder and phonograph industries should grow moderately throughout the remainder of this decade. Pioneer Electronics, a small manu- facturer of speaker units, plans to branch out into the production of automobile stereos in 1974. Ex- pansion plans of the Taiwan Capetronic Corpora- tion now underway include construction of a $330,- 000 plant for the fabrication of multiplex stereo- phonic phonographs. Ill The manufacture of desk and pocket calculators increased dramatically from virtually no production a few years ago to $12 4 million in 1972, in which year 21 firms with over 3,000 workers were making calculators. Major producers include Wang Lab- oratories (Taiwan), Ltd.; Leco Electronics Corpora- tion; Hodaka Taiwan Electronics Corporation; Os- cars Electronic Industries, Inc.; and Qualitron In- dustries Corporation. All five firms are based in Taipei. Industrial/commercial equipment sector. — The industrial/commercial equipment sector in 1972 comprised 10 factories employing a total of 2,256 persons. Production amounted to $8.6 million in that year and consisted mainly of telephones, tele- phone switchboards, signal generators, oscilloscopes, transceivers, direction finders, fish finders, radio buoys, alarms, and meters. Output by this sector is expected to approach $55 million in 1977, re- flecting an average annual growth rate of about 45% for the 1972-77 period. The Government's 10-year development plan for the electronics industry calls for increased produc- tion of more sophisticated electronic instruments and communications equipment. Priority will be given to realizing production capability for mini- computer peripherals, computer terminals, X-ray apparatus, telephone and telegraph apparatus, nu- merical control systems, electronic measuring instru- ments, and process control and industrial meters. Telecommunications equipment. — Taiwan's five telecommunications equipment manufacturers, em- ploying a total of 1,842 workers, all produce tele- phones. One firm also makes a telephone message register and counter, and two companies fabricate switchboards. Output of telephones rose from $1.3 million (66,478 units) in 1971 to $1.6 million (79,670 units) in 1972. Switchboard production reached $6.1 million in 1972, up from $4.9 million in the previous year. The Tatung Company, the largest telephone ap- paratus manufacturer in Taiwan, also produces a wide range of other electronic products. Tatung is the only telecommunications company that pro- duces some of its own electronic components; the other telephone equipment firms rely almost com- pletely on imported devices. The Tongya Telecommunication Industry Co., Ltd., with 160 workers, manufactures coin tele- phones and telephone message registers and count- ers. Other manufacturers of telecommunications equipment in Taiwan are the United Electric & Ma- chinery Manufacturing Corporation, Taiwan Tele- communication Co., Imperial Industrial Corpora- tion, and Power Electronics Co., Ltd. All are based in Taipei except Imperial, which is located in Tao Yuan County. The policy of the ROC Government is to stim- ulate investments in the local telecommunications equipment industry to improve its technological development and productivity in the interest of increased exports. Consistent with this policy, the Government is placing great emphasis on the pro- duction of sophisticated telecommunications equip- ment for which foreign demand is greatest. This im- plies a sharp rise in the industry's demand for ad- vanced U.S. electronic components, which enjoy a high degree of acceptance in Taiwan. The Competitive Environment Taiwan's production of the selected groups of electronic components covered in this survey more than doubled in the 1971-73 period, rising from $51.7 million to $117.8 million. Output is expected to exceed $280 millon in 1977. The country's manufacturers of components are highly export-oriented; more than 50% ($64.1 million) of 1973 output of product category com- ponents was sold in foreign markets. Exports are expected to total $152 million in 1977. Foreign subsidiaries, primarily of U.S. and Japan- ese firms, are the most important producers of elec- tronic components in Taiwan. The country's elec- tronic components industry comprises 208 com- panies, employing a total of some 70,000 people. Of these, 33 firms are subsidiaries of U.S. com- panies, together employing 45% of the industry's total work force. Subsidiaries of Japanese companies number 35 and account for 30% of industry em- ployment. About 5% of the work force is employed in other foreign-owned firms, and 20% in locally capitalized companies. Many major producers of electronic components in Taiwan are making determined efforts to in- crease production to capture a larger share of rapidly expanding export markets, as evidenced by the expected 23% average annual increase in the country's output of IC's during the 1973-77 period. Annual output of IC's is predicted to climb from $52 million to $120 million in that period. Among the country's leading producers of IC's are: Asionics Taiwan, Inc.; China Semiconductor Corp.; Fine Products Microelectronics Corp.; Orient Semicon- ductor Electronics, Ltd.; Philips Electronics Build- ing Elements Industries (Taiwan), Ltd.; and RCA Taiwan, Ltd. All are located in Taipei with the exception of Orient Semiconductor, which is in the Nantze export processing zone. Domestic production of capacitors also is ex- pected to increase sharply in the 1973-77 period, expanding from $18 million to $30 million. Impor- tant Taiwan producers of capacitors are: Asuno Electronics Corp., Taichung; Cathay Electronics In- dustrial Co., Taipei; Cen-Ter Electronic Co., Ltd., Nan Tou County; Centric Industry Co., Ltd., Tai- 112 pei County; and Cornell-Dubilier Electronics (Tai- wan), Inc., Tao Yuan County. Alps Electric plans to expand its manufacturing facilities for capacitors, as well as for tuners and switches. Domestic production of resistors, which supplies a large share of the home market, should reach $30 million in 1977. This would reflect an average an- nual growth of 24% from the 1973 level of $12.8 million. Taiwan's major producers of resistors in- clude Alexandria Enterprise, Ltd., Taipei; An Hsing Industry Co., Ltd., Tao Yuan; Atlas Electronics (Taiwan), Ltd., Taipei; and First Resistor & Con- denser Co., Ltd., Taipei. Manufacturers of transistors in Taiwan recorded production valued at $22 million in 1973. Domestic production is expected to climb to $60 million in 1977. Unitron Industries Corp., Ltd., in Hsin Chu County, and General Instrument of Taiwan Ltd., in Taipei, are among the country's important manufac- turers of transistors. Government support generous. — The Government of the Republic of China has actively encouraged the development of the electronics industry. There are two government-operated research organizations in Taiwan devoted to electronics — the Telecom- munications Laboratories of the Ministry of Com- munications and the Union Industrial Research In- stitute (UIRI) of the Ministry of Economic Affairs. The Telecommunications Laboratories consist of a transistor lab, a switching lab, and a computer center. They are staffed with a total of 38 research- ers and 24 technicians. The UIRI facilities include laboratories for environmental tests, physical charac- teristics tests, and electrical characteristics tests. The UIRI started quality testing of resistors, capacitors, coils, transformers, and loudspeakers in 1971. The Engineering College of National Chiao Tung University employs 83 researchers in 8 laboratories devoted to research and development of various electronic components and equipment, including semiconductors, switching devices, microwave com- munications equipment, computers, and controls. At the Engineering College of National Taiwan Uni- versity, 18 researchers work in laboratories special- izing in radio wave propagation research, materials testing, and computer and solid state electronics research. The ROC Government also has set up an Elec- tronics Industry Development Committee under the Council for International Economic Cooperation and Development. The Committee is headed by the Di- rector-General of the Directorate General of Tele- communications of the Ministry of Communications and includes 14 members from relevant Government agencies, academic institutions, and industry. Under the direction of the Committee, a survey of the technical aspects of the industry was undertaken in 1971. The Government assists investors in compo- nents production in a variety of ways. The Chi- nese Productivity Center gives technical assistance to investors in the electronics industry. The Gov- ernment has instructed banks to increase funds and simplify lending procedures for small and medium- size electronics firms. Electronic components manu- facturers who intend to export their total production may locate their factories in export processing zones or establish bonded factories to qualify for duty ex- emptions on imported raw materials or semifinished products. Such manufacturers are also entitled to either a 5-year exemption on corporate taxes or ac- celerated depreciation of fixed assets. The Government's electronics industry develop- ment plan stresses the importance of domestic elec- tronic component production to the development and expansion of Taiwan's consumer electronics in- dustry. The manufacture of integrated circuits for electronic computers and electronic switching sys- tems is also being encouraged. U.S. market penetration could increase. — Taiwan's manufacturers of electronic end products are eager to receive more information about U.S. -made elec- tronic components, especially regarding their avail- ability, price, and delivery times. The most effective method of selling components in Taiwan is by com- petent on-the-spot representation. U.S. producers of components that provide applications assistance, particularly in such areas as calculator production, will find themselves in a strong selling position vis-a- vis the Japanese, the main competitors of U.S. sup- pliers in the Taiwan market. Among the U.S. firms presently exporting elec- tronic components to Taiwan are Cornell-Dubilier Electric Corp.; RCA Corporation; Better Coil and Transformer Corp.; Motorola Semiconductor Prod- ucts, Inc. and Fairchild Semiconductors. Other American electronic component producers active in the Taiwan market are General Instrument Corpora- tion; P. R. Mallory & Co., Inc.; and GTE Sylvania, Inc. U.S. suppliers face their stiffest competition from Japanese firms in the Taiwan market. Among the Japanese manufacturers who have successfully en- tered the expanding Taiwan electronic components market are the Matsushita Electric Industrial Co., Ltd.; Sanyo Electric Co., Ltd.; Hitachi Co., Ltd.; and Mitsumi Co. Other Japanese suppliers are TDK Electronics Co., Ltd.; and Asuno Electronics; Toko, Inc.; and Nippon Electric Co., Ltd. Import duties. — Import duties on electronic com- ponents are levied on the cost, insurance, and freight (c.i.f.) value plus 20%. Rates on components range from 7% to 33%. In addition, harbor dues on sea shipments normally amount to 3% based on the duty-paid value. The Taiwan Garrison Command, a 113 military authority controlling the sale and manufac- ture of radio and communication equipment in Tai- wan, requires advanced registration of imported electronic equipment. Information on official import duty rates and regu- lations applicable to specific products within the product category may be obtained from the U.S. Department of Commerce, Domestic and Interna- tional Business Administration, Room 4217, Main Commerce, Washington, D.C. 20230. Technical Requirements The characteristics of electrical power supply in Taiwan are 110/220 volts, 60 hertz, single- or 3-phase. Although the metric system of weights and meas- ures is the legal standard, the English system is commonly used. Published national standards for electronic com- ponents in Taiwan are currently being prepared by the Chinese National Bureau of Standards. The following market research study, upon which this Country Market Survey is based, is available on loan from the U.S. Department of Commerce, Do- mestic and International Business Administration, Room 1617M, Main Commerce, Washington, D.C. 20230: "The Market for Electronic Components in Tai- wan," DIB 74-06-506, November 1973. 114 United Kingdom United Kingdom: Size of market for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Rising demand among the United Kingdom's consumer, industrial commercial, and military sectors for finished electronic products should increase sales of all types of electronic components by 30% between 1973 and 1977. Purchases in 1977 are expected to exceed $1.3 billion, compared with $1 billion in 1973. Sales in 1973 of the selected groups of elec- tronic components covered in this survey totaled $572 million, an increase of 50% over the 1971 figure of $381 million (see table 1). The market is forecast to rise at an average annual rate of nearly 17% and exceed $700 million in 1977. British total imports of product category compo- nents more than doubled between 1971 and 1973, climbing from $121 million to $248 million. The import market is forecast to exceed $260 million in 1977. With increasing shares of domestic pro- duction being channeled to Britain's export mar- kets, imports will fill a growing proportion of home demand. The import share of the market was 32% in 1971; it rose to 43% in 1973, and should level off at around 37% by 1977. The United States was Britain's leading supplier of components within the product category in 1972, holding a 24% share of the import market (see ta- ble 2). Although imports from the United States increased from $39 million in 1969 to $41 million in 1972, the U.S. share of British imports declined from 48% to 24% during the same period. This drop is attributable largely to increasing British purchases of product category components from European- and Asian-based manufacturing subsid- iaries of U.S. firms. Other major foreign suppliers of product category components to the United Kingdom are Germany, Japan, and the Netherlands. | | 1969 19 1977 Color TV picture tubes Capacitors Integrated circuits Diodes and Rectifiers Transistors Resistors L I I J 0 20 40 60 80 100 120 140 160 180 Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Product Category Definition Electronic components covered in this survey are basically confined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product category" as used in this pub- lication is limited to these six groups of components. 115 United Kingdom — Selected Indicators (1972) Gross national product: $135 billion Population: 56 million Total country imports: $28 billion Imports from U.S. (w/share of total): $3 billion (10%) Total country exports: $24 billion | Exports to U.S. (w/share of total): $3 billion (12%) Exchange rate (May 1974): 0.42 pounds=US$l Sales Opportunities Manufacturers of electronic products in the United Kingdom will spend almost $3 billion on electronic components during the 1974-77 period. Imports are expected to account for more than one-third of this consumption. U.S. suppliers have particularly favor- able sales prospects in the British market, largely because of the competitive advantages derived from their technological capability to develop new and more sophisticated components. A market research survey recently conducted in the United Kingdom for the U.S. Department of Commerce, Office of International Marketing re- veals that favorable sales opportunities exist for American exporters of the following electronic com- ponents: Color TV picture tubes. — Sales of color TV pic- ture tubes rose 137% during the 1971-73 period, advancing from $72 million to $172 million. Due to saturation of the market for color TV's, however, market analysts forecast a drop in sales to $145 million in 1977. Imports of color TV picture tubes more than tri- pled in value between 1971 and 1973, climbing from $25 million to $78 million. They accounted for more than 45% of domestic consumption in the latter year. Increased domestic production of color TV picture tubes and diminishing demand for new color TV sets are expected to cause a decline in imports to $26 million by 1977. Best sales pros- pects are forecast for 110° deflection tubes, which TV set makers are now using in most large-screen models, and precision in-line (PIL) bonded yoke tubes, which are used for the smaller sets. Capacitors. — The British market for capacitors is presently characterized by supply shortages, due primarily to the recent upsurge in color TV receiver production. Sales totaling more than $85 million in 1971 advanced nearly 20% to over $102 million in 1973. Overall sales growth of 10% a year is forecast during the 19.73-77 period, with the market projected to reach almost $ 1 50 million in the latter year. British purchases of foreign-made capacitors in- creased 85% during the 1971-73 period, climbing from $21 million to almost $40 million. Imports are projected to increase at an average rate of 13% a year from the 1973 level, reaching $65 million in 1977. The leveling off of demand for color TV sets is expected to ease the tight supply situation for cer- tain types of capacitors. Electrolytic and chip ca- pacitors, however, will continue in high demand. The British market for electrolytic capacitors is projected to expand approximately 10% a year. A growing market is also forecast for chip capacitors used with thick and thin film hybrid integrated cir- cuits. Demand for these devices is expected to ad- vance with the growing market for hybrid IC's at an average rate of about 8% a year. Integrated circuits. — The market for integrated circuits in the United Kingdom increased 78% be- tween 1971 and 1973— from $45 million to $80 million. The development of more specialized IC's for an increasing number of applications is expected to boost sales to $170 million in 1977. This would represent an average growth rate of 21% a year. Imports of IC's, which more than doubled from over $20 million in 1971 to $42 million in 1973, are projected to increase at an average rate of al- most 16% a year over the next 4 years. They are projected to reach $75 million in 1977. Highly spe- cialized U.S. -made IC's are expected to have a com- petitive edge over those produced by other countries. Local trade sources forecast that British demand will be strongest for the following integrated circuit packages: • TTL (MSI) • CMOS • Linears • 1024-bit P-Channel RAM (1103) • 1,024-bit N-Channel RAM • 1K-8K ROM • 4k. N-Channel RAM • STTL • ECL • Power Dailingtons British computer manufacturers are expected to move toward the use of semiconductor rather than core memories over the next 5 years. This will in- crease the demand for the 1103 1,024-bit dynafnic RAM. The major part of this market will continue to be met by imports, chiefly from the United States and Canada. The introduction of the 4K N- channel RAM has stimulated development of com- puter memories using this device. It is expected that large quantities will be needed by 1975. Imported 1,024-bit static N-channel MOS RAM's will find a growing market outside the main mem- ory area, at least through 1975. The ECL 10K 116 range has been generally adopted for high-speed logic in large CPU memories; Schottky TTL is be- ing used in memories of smaller computers. Favor- able market prospects are also seen for single chip parallel processors used with bipolar RAM's and ROM's for microprogramming. Development of inexpensive IC logic has signifi- cantly increased the use of digital circuitry in in- dustrial control instruments. The advent of LSI is expected to further hasten this process. The use of MOS microprocessing in industrial controls is also predicted to grow rapidly during the next 5 years. CMOS is currently being substituted for TTL in an increasing number of circuit designs. The British Post Office Corporation, which con- trols the country's telecommunications system, is replacing its older exchange equipment with elec- tronically controlled reed-relay exchanges. This is in- creasing the demand for bipolar saturate logic cir- cuits. Conventional dial telephones are also being replaced by the pushbutton variety, generating new market opportunities for MOS shift registers and logic. Once pushbutton phones become established, the use of extra facilities such as automatic dialing equipment, memory for common-code storage, and facsimile equipment will also rise and stimulate de- mand for advanced IC's. Other major developments in telecommunications are the introduction of pulse-code and pulse-com- pression multiplexing in high traffic areas and the use of microwave and laser links over distances of up to 100 miles. Current efforts to develop megabit- rate pulse code modulation (PCM) transmission could open a substantial market for ECL within the' next 5 years. These developments will require TTL for slow-speed PCM systems, fast bipolar logic for PCM equipment, and MOS "bucket-brigade" analog serial memories for pulse compression. De- mand by the telecommunications industry during the next 5 years will also be strong for lower power TTL for test equipment, linear amplifiers for hand- sets, and phase-lock loop IC's for tone decoders. Britain's expanding production of such commu- nications equipment as small radar systems, paging systems, and long-range military and civilian porta- ble transceivers points toward growing sales of fast digital logic IC's, IC's for linear IF, audio amplifier, and voltage regulator applications, and low-power linear IC's. There are now five or six IC's in each color tele- vision set; the average should reach 10 per set dur- ing the next 2 to 5 years. Development of more complex circuits combining the functions of two or more IC's will hold IC content at that level. IC's are expected to be used more extensively during the next 5 years in audio equipment, particu- larly in automobile entertainment systems and in United Kingdom — The Electronics Industry Basic Data (1972) Total value of production: $3.2 billion Number of manufacturers: Over 300 medlum-to- large firms Industry labor force (est.) 450,000 Output of principal electronic components user industries — Consumer products industries: broadcast receiving and sound reproduction equipment $707 million pocket calculators $4 million photographic equipment $160 million Industrial/commercial equipment industries: computers and related equipment $511 million telecommunications equipment $1,175 million measuring and testing instruments $112 million medical electronic equipment $18 million quadraphonic sound systems for the home. Other consumer electronic products with high potential for expanded use of IC's include the following: pocket calculators; exposure controls in cameras; domestic appliances such as washing machines, food mixers, and light dimmers; electronic musical in- struments and toys; and electronic security systems. The British automotive industry offers improving prospects for the application of IC technology in the following systems: fuel injection (ROM/PLA/ custom-microprocessor); antiskid braking (CMOS/ bipolar digital and bipolar linear); seat-belt inter- locks (CMOS/bipolar custom); safety and warning devices ("photo" switches and MOS or bipolar logic); electronic ignitions (proximity switch de- vices involving thyristor trigger output); electronic transmission controls (MOS or bipolar digital IC's); tachometers/odometers (bipolar digital counter); and alternator regulators (monolithic IC's). Britain is second only to the United States in the manufacture of aerospace equipment. This indus- try provides a growing market for high-quality IC's, particularly for TTL, interface ROM's, and power- driving IC's. Military control and communications systems manufactured in the United Kingdom also have a high microcircuit content and provide a good market for U.S. suppliers of IC's. Diodes and rectifiers. — The market for diodes and rectifiers amounted to $54 million in 1971 and rose 117 Table J . — United Kingdom: Size of the market' for selected groups of electronic components, 1969-77 (in millions of U.S. dollars) Description 1969 1971 1972 1973 1974 1977 Resistors Production1' 48.0 54.5 51.1 55.8 61.4 69.7 Imports 11.3 12.9 20.1 23.3 27.0 31.0 Exports 8.4 3.1 8.0 11.7 14.0 17.0 Market size 50.9 64.3 63.2 67.4 74.4 83.7 Capacitors Production' 63.4 75.4 68. X 75.6 83.0 108.0 Imports 16.1 21.3 26.8 39.5 48.0 65.0 Exports 7.4 11.3 8.5 12.8 17.0 24.0 Market size 72.1 85.4 87.1 102.3 114.0 149.0 Color TV picture tubes Production1 10.5 5(2.5 81.4 127.5 148.8 195.5 Imports 5.5 25.3 47.5 78.0 48.8 26.0 Exports 1.3 5.4 17.6 34.0 29.3 76.5 Market size 14.7 72.4 I I 1.3 171.5 168.3 145.0 Diodes and rectifiers Production- 51.2 45.6 57.4 60.5 68.0 68.8 Imports 11.0 13.1 19.0 25.6 29.0 29.0 Exports 5.0 4.5 5.0 9.3 11.0 9.4 Market size 57.2 54.2 71.4 76.8 86.0 88.4 Transistors Production1' 46.7 41.5 52.1 61.6 62.7 56.7 Imports 21.5 27.6 29.3 39.6 41.0 36.0 Hxports 10.3 8.9 I 1.1 26.8 27.0 23.0 Market size 57.9 60.2 70.3 74.4 76.7 69.7 Integrated circuits Production2 45 8 33.3 54.9 61.0 86.2 151.2 Imports 15.3 20.4 25.5 41.9 49.0 75.0 Exports 4.9 9.0 11.7 23.3 32.0 56.0 Market size 56.2 44.7 68.7 79.6 103.2 170.2 Totals , Production1' 265.6 302.8 365.7 442.0 510.1 649.9 Imports 80.7 120.6 168.2 247.9 242.8 262.0 Exports 37.3 42.2 61.9 117.9 130.3 205.9 Market size 309.0 381.2 472.0 572.0 622.6 706.0 1 Size of the market equals production plus imporis minus exports. Paris and accessories not included. - Production figures include components manufactured by OEM's for their own use. In-house production of resistor^ and transistors is negligible: in-house production of capacitors represents 5 to 10% of the total: color TV picture tubes. 40 to 45%; diodes and rectifiers, 5 to 10'; ; and integrated urcuits. under 5ro. Source: U.S. Department of Commerce. Bureau ol International Commerce market survey. 42% to almost $77 million in 1973. Sales are ex- pected to reach close to $90 million in 1977. Imports, which increased 95% between 1971 and 1973 (from SI 3 million to almost $26 million). are projected to reach about $30 million in 1974 and remain at that level through the 1974-77 pe- riod. Trade sources report good prospects for sales of high-power rectifiers to Britain's industrial electronic equipment sector. The market outlook for low- current devices is also good in the short term but will diminish as IC's take their place. The market for signal diodes and rectifiers is forecast to remain stable through 1977. Transistors. — Annual transistor sales, which rose 24% from $60 million in 1971 to over $74 million in 1973, are expected to drop gradually to $70 mil- lion by 1977. Similarly, imports, which enjoyed a 44% increase between 1971 and 1973, rising from about $28 mil- lion to $39 million, are expected to peak at about $41 million in 1974 then decline to an estimated $36 million in 1977. Although IC's will continue to displace discrete transistors in many applications, the use of power transistors of less than 10 amperes collector current will continue to rise. These devices are in high de- mand by electrical power utilities and by manufac- turers of automotive electronics systems, consumer audio equipment, TV receivers, and high-frequency communications equipment. Resistors. — Rising use of resistors in specialized 118 applications is expected to boost the British resistor market from $67 million in 1973 to around $85 mil- lion in 1977. This 5-year forecast represents a mar- ket growth averaging approximately 6% a year. Of greater significance to U.S. resistor suppliers, however, is import growth, which rose 81% — from $13 million to $23 million — between 1971 and 1973. Imports arc forecast to reach more than $30 million in 1977. Best sales potential is seen for var- iable and thick film resistors. Sales of variable re- sistors are expected to continue to grow at an av- erage annual rate of about 10% a year through 1977. Thick film power resistor assemblies will be in increasing demand during the next 5 years, as they are expected through that period to displace the more expensive wirewound power resistors in TV receivers and a variety of other consumer prod- ucts. Other electronic components.— Among the types of electronic components outside the product cate- gory that offer promising sales opportunities to U.S. exporters are the following: Connectors. — Based on a predicted average an- nual growth of more than 10%, purchases of con- nectors are expected to rise from $56 million in 1973 to $84 million in 1977. Printed circuit and coaxial connectors have the best sales potential. British manufacturers in the computer, instru- mentation, and business machine industries are cur- rently the best markets for connectors. Manufac- turers are continually searching for new applica- tions, however, and are expected to use connectors increasingly in the nuclear energy field and in cer- tain consumer products, including vending machines, clocks, and watches. Thyristors. — The British market for thyristors, estimated at $10 million in 1973, is expected to in- crease at an average annual rate of over 12%, reaching $16 million in 1977. Best sales prospects are for bidirectional triacs and 7.5-35A, 1500v. unidirectional thyristors. Sales of bidirectional triacs, particularly those used in light dimmers, arc forecast to climb from 500,000 units in 1973 to about 3.5 million units in 1974. Consumption of unidirectional thyristors, used primarily for motor control and lighting inverters, is projected to increase nearly 64% between 1973 and 1974, going from 1.1 million to almost 1.8 mil- lion units. The market for unidirectional thyristors for use in welding and heating equipment, electric vehicles, battery chargers, converters, and variable-speed drives is expected to increase over 30% between 1973 and 1974, rising from 120,000 to 160,000 units. Sales of unidirectional thyristors for motor control and electric traction will almost double be- tween 1973 and 1974, advancing from 2,400 to 4.600 units. Special semiconductor devices. — Rising demand is forecast for light emitting devices due to growth in production of hand-held calculators, automotive dashboard displays, and instrumentation displays. Sales of these devices, estimated at about $8 million in 1973, are forecast to reach $30 million in 1977. The market for photosensors, which was estimated at $3 million in 1973, is expected to increase at a 20% average annual rate during the next 5 years. Rapidly rising British demand for Gunn-effect di- odes, particularly for use in microwave applications and security alarm systems, is expected to result by 1977 in a doubling of the present $2.5-million annual market. Selected End-User Industries The industrial/commercial equipment sector of the British electronics industry is the best market for electronic components, accounting for an esti- mated 52% of the country's total purchases. The consumer products sector is the second largest user of components, accounting for roughly 39% of the total market. Trade sources predict that by 1977 each of these two major user sectors will account Table 2. — United Kingdom: Imports from the United States, and U.S. share of total imports, of selected groups of electronic components, 1969-72 ' (in millions of U.S. dollars) 1969 1971 1972 U.S. share U.S. share U.S. share Description Value (percent) Value (percent) Value (percent) Resistors 5.9 52 3.1 24 3.9 19 Capacitors 4.5 28 4.1 19 4.0 15 Color TV picture tubes 2.3 42 3.0 12 9.6 20 Diodes and rectifiers 5.8 53 4.5 35 8.7 46 Transistors 10.0 47 10.8 39 5.5 19 Integrated circuits 10.4 68 7.9 39 9.2 36 Total 38.8 48 33.5 28 40.9 24 1 Parts and accessories noi included. Source: U.S. Department of Commerce. Bureau of International Commerce market survey. 119 for about 45% of Britain's total components con- sumption. The military equipment sector's present 9% share of component consumption is expected to remain stable through 1977. Since industry fig- ures show no breakdown of expenditures for com- ponents by the industrial/commercial and military sectors, the two are treated together in the follow- ing section. Industrial/ commercial/ military equipment sector. — British production in 1972 of telecommunica- tions equipment, computers and related equipment, communications equipment, industrial electronic control equipment, measuring and test instruments, medical electronic equipment, automotive electronic systems (except automobile radios and tape play- ers), and other industrial electronic end-products to- taled about $2.1 billion. Production is expected to increase at an average annual rate of 1 1 % during the 1973-77 period, reaching nearly $4 billion in the latter year. The sector employed an estimated 246,000 persons in 1971. Telecommunications equipment. — The telecom- munications equipment industry, the largest single subsector in the industrial/commercial/military elec- tronics equipment sector, accounted for nearly 35% ($735 million) of the sector's output in 1972. Tele- phone exchange equipment' accounted for 60% ($440 million) of this output; data transmission equipment, 16.5% ($122 million); subscriber ap- paratus, 13% ($96 million); and switching and other telecommunications equipment, 10.5% ($77 million). The British Post Office Corporation (POC), by far the telecommunications industry's largest cus- tomer, purchased 68% of the industry's total out- put in 1971. Its planned expenditures for expansion and modernization of the nation's telecommunica- tions system during the period 1973-77 are placed at $5 billion. The expected rapid rise in telecommu- nications industry sales to the POC and the opti- mistic outlook for expanded export sales underlie a 1977 production forecast of over $1.3 billion, a gain of more than 80% over 1972 output. The leading manufacturers of telecommunications equipment are the General Electric Company (GEC), the Plessey Co., Ltd., and Standard Tele- phone and Cables. Ltd. (STC), an ITT subsidiary. STC supplies about 25% of the POC's requirements. Computers and related equipment. — Production in the computer industry reached $511 million in 1972, representing approximately 24% of the in- dustrial/commercial/military electronic equipment sector's total output in that year. Production of com- puter hardware in 1973 was an estimated $615 mil- lion. It is forecast to rise at an average annual rate of nearly 12% over the 1973-77 period, reaching $965 million in the latter year. Production of related equipment, including electronic calculators, elec- tronic typewriters and electronic cash registers, is expected to reach $50 million in 1977. British-owned companies account for more than 40% of the computer industry's annual produc- tion. The largest of these is International Com- puters Ltd. (ICL). ICL is expected to announce a new range of models designed to expand both do- mestic and export sales. To help launch the new line, the Government provided ICL with $35 mil- lion and has agreed to contribute an additional $65 million for R&D up to 1976. The Government, more- over, has adopted a "buy-British" program which will help the firm further expand its share of the British computer market. Trade estimates put ICL production growth at around 15% a year through 1977. Other British computer manufacturers include: Ferranti, Ltd.; GEC Computers, Ltd.; and Com- puter Technology, Ltd. Major U.S. manufacturing subsidiaries in the United Kingdom include: IBM; Honeywell Information Systems, Ltd.; NCR Co., Ltd.; Burroughs Machines, Ltd.; Mohawk Data Systems; Univac; and Digital Equipment Corpora- tion. These U.S. firms account for almost 60% of the computer industry's 1972 production. ICL has no electronic components production ca- pability at present and gives no preferential treat- ment to firms with an ownership share in the com- pany. It does assemble semiconductor memories from purchased circuits. The computer divisions of Ferranti and other British computer manufacturers buy on the open market and give little or no pref- erence to their affiliated component producers. American subsidiaries manufacturing in the United Kingdom supply 55 to 60% of the com- puter industry's requirements for electronic com- ponents. IBM produces some semiconductors in Europe for use in its British operations and is ex- pected to expand component production in the United Kingdom to meet its own needs. NCR and Burroughs are expected to establish semiconductor production capability in Europe to supply their British plants. Honeywell produces electronic com- ponents in the United Kingdom on a small scale. Communications equipment. — The communica- tions equipment industry, including manufacturers of radar, navigational aids, and radio communica- tion and public broadcasting equipment, accounted for 20% ($440 million) of the sector's total pro- duction in 1972. Purchases by the military ac- counted for 40 to 45% of the industry's total out- put. The military share is predicted to remain rela- tively stable at around 40% during the period 1974-77. Manufacturing subsidiaries and licensees of American firms in Britain account for an esti- mated 15 to 20% of the communications indus- try's total component purchases. 120 Electronic instrumentation and industrial control equipment. — Electronic process control systems are being used increasingly ( 1 ) in a wide variety of manufacturing processes, (2) for handling and stor- age systems, and (3) to monitor pollution and other environmental factors. Production, representing about 9% of total sector output, is expected to rise from $182 million in 1972 to $350 million in 1977. British production of instrumentation equipment, including measuring and test equipment, nucleonic instruments, and medical electronic and X-ray equipment, was valued in 1972 at $150 million, or about 7% of total sector output. Production of measuring and test instruments accounted for 75% of the industry's production. Medical electronic equipment. — The production of medical electronic equipment and instruments was $18 million in 1972. According to industry sources, however, not all electronic equipment used for medical purposes is included, and the figure should actually be two or three times greater. The market is forecast to expand rapidly in the mid- 1970's, due to past underinvestment in electro- medical equipment. Production of medical elec- tronics is therefore expected to grow at an average rate of 15% a year during the 1974-77 period, rising to between $75 and $100 million in 1977. The presence of several large manufacturing sub- sidiaries and licensees of American firms in this in- dustrial subsector brings the share of electronic components purchases accounted for by American affiliates to 20 to 25%. Consumer products sector. — British production of consumer electronic products totaled $1.6 billion in 1972 and is forecast to rise 150% to about $4 billion in 1977. The radio and television broadcast receiving and sound reproduction equipment sub- sector makes, by far, the largest single contribution to the sector's output. Production was $707 million in 1972, or approximately 40% of the consumer product sector's total output. This figure is forecast to more than double to $1.5 million in 1977. Television receivers. — -The United Kingdom boasts Europe's fastest growing color TV receiver market. In worldwide production, the British indus- try ranks third behind Japan and the United States. Output of both black-and-white and color models rose 25%, from 2.4 million units in 1971 to 3 mil- lion units in 1973. Production of color sets alone rose 130%, from 834,000 units in 1971 to almost 2 million in 1973. Although demand for color tele- visions is peaking, production should continue to account for the largest share by value of the con- sumer product sector's output. Thorn Colour Tubes, Ltd., Britain's leading TV set producer, supplies over one-third of the coun- try's color TV set market. It has announced sub- stantial expansion plans with an eye to increasing exports to Europe. Receivers manufactured specifi- cally for export, particularly to Germany, will have features not available in models made for the home market. These include slider controls, eight-channel touch tuner with channel selector indicator, remote control option, and switched time constant on the horizontal synchronization circuits to accommodate the flutter of video tape recorders. Other major British television manufacturers are: Rank Radio International, Ltd.; GEC Radio and Television, Ltd.; and Dccca Radio and Television, Ltd. The only significant foreign producers in the industry are Pye Telecommunications, Ltd., a Philips subsidiary, and ITT Consumer Products, Ltd. Thorn manufactures color TV picture tubes under license by RCA. Though it produces most of its own tubes, it will, when necessary, buy from out- side suppliers. Pye, the nation's second largest color TV receiver manufacturer, purchases almost all of its tubes and other electronic components from Philips subsidiaries in the United Kingdom and Europe. Rank Radio reportedly will buy components from any source, provided the price is right. GEC has an "open" buying policy but does produce some specialized components for its own use. ITT is a highly integrated company producing a complete range of components but allows its subsidiaries to "shop around" for their component requirements. ITT Consumer Products and Thorn, the two U.S. affiliates manufacturing television receivers in the United Kingdom, account for 25 to 30% of com- ponent demand by the industry. Radio and audio equipment. — The British radio manufacturing industry supplies less than 10% of home demand, and output has been declining in re- cent years in the face of mounting competition from the Far East. Production of car radios, however, is expected to almost double from 555,000 units in 1972 to nearly 1 million units in 1977. Demand for tape recorders, particularly for the less expensive cassette models, has doubled every year since 1969. Imports have been the main bene- ficiaries of the growing market, however, and Brit- ish production has remained at an annual output of around 300,000 units. Despite competition from imports, production of audio components is pro- jected to rise. Stereo amplifier output, for instance, is expected to increase from 550,000 units in 1973 to 800,000 units in 1977. Photographic equipment. — Production of photo- graphic equipment in the United Kingdom totaled $160 million in 1972 and should reach $225 million in 1977. The product line includes photocopying equipment, cameras, projectors, and exposure me- ters. These are mainly in the low-cost range. The total value of electronic components used in these 121 products is projected to be roughly $5 million annu- ally by 1977. The Competitive Environment The British electronic components industry is strongest in the manufacture of tubes, power de- vices, and standard passive devices such as capaci- tors, resistors, and connectors. Foreign suppliers are generally considered to be more advanced in the development and production of integrated circuits and the more sophisticated semiconductor devices, such as LED's. Domestic production of product category com- ponents rose from $266 million in 1969 to $442 million in 1973. It is expected that output will ex- pand at an average rate of 10% a year and reach $650 million in 1977. Exports, which in 1973 amounted to $118 million, or slightly more than 20% of production, should reach almost $206 mil- lion in 1977. This represents an average annual growth rate of 15%. British manufacturers will continue to account for approximately 60% of do- mestic consumption of product category compo- nents. American subsidiaries and licensees manu- facturing these components in the United Kingdom supply roughly half of this market. Color TV picture tubes. — A determined effort by British color TV picture tube manufacturers to boost both production and exports underlies average annual growth rates of 1 1 % and 23%, respectively, that are forecast for the 1973-77 period. Production was estimated at over $127 million in 1973 and should reach more than $195 million in 1977. Ex- ports are projected to more than double between 1973 and 1977, rising from $34 million to $76 million. The major domestic manufacturers are Thorn Colour Tubes, Ltd., a licensee of RCA, and Mul- lard, Ltd., a subsidiary of Philips of the Netherlands. Thorn's output alone represents about 55% of the industry's production for home consumption. Thorn plans to expand production at its largest plant from 750,000 to 1.2 million tubes per year by mid-1975. Mullard is adding a second production line at its largest plant, increasing capacity from its current annual output of approximately 300,000 tubes to 900,000 tubes by the late 1970's. Import figures for 1972 show Japan as the lead- ing foreign color TV picture tube supplier, with a 28% share of the import market. The United States is Britain's second leading foreign source of supply, with a 23% share of the import market, followed by France with 19% and Canada with a 13.5% share. Capacitors. — British production of capacitors amounted to almost $76 million in 1973. Based on a predicted average annual growth rate of nearly 10% a year, production should reach $108 million in 1977. Exports, representing about 11% ($13 million) of output in 1973, are expected to grow an average of 17% a year and reach $24 million in 1977. With export growth outpacing production increases, the British industry's share of domestic consump- tion is expected to shrink from 61% in 1973 to approximately 56% in 1977. Import figures for 1972 show Germany as the leading foreign supplier with a 21% share of the import market, followed by the Netherlands with 17%, the United States with 15%, and Japan with a 10% share. A declining trend in imports from the United States is due primarily to the establishment of American manufacturing facilities in the United Kingdom and other European countries. Major U.S. subsidiaries manufacturing capacitors in the United Kingdom include: Dublier, Ltd.; Erie Electronics, Ltd.; ITT Components Group Europe; and Sprague Electric. Their share of British production for home consumption is estimated to be between 30 and 40%. Mullard, Ltd., and Facel (U.K.), Ltd., an Italian subsidiary, are the other major foreign-owned subsidiaries. The principal British-owned capacitor producers are: Hunt (A.H.), Ltd; Plessey Co., Ltd.; Advance Filmcap, Ltd.; and Pye T.M.C. Components, Ltd. Integrated circuits. — British production of inte- grated circuits is expected to rise from $61 million in 1973 to over $150 million in 1977, an average annual growth rate of 25%. Exports also are fore- cast to grow at a 25% average annual rate and reach $56 million in 1977, up from $23 million in 1973. Six subsidiaries of U.S. firms are dominant in British IC manufacturing: General Instrument (U.K.), Ltd.; ITT Components Group Europe; Motorola Semiconductors, Ltd.; National Semicon- ductor (U.K.), Ltd.; Signetics International, Ltd.; and Texas Instruments, Ltd. These firms account for 70 to 80% of the country's production of IC's for domestic consumption. Texas Instruments is in the lead, followed by Motorola, General Instrument, and National Semiconductor. Texas Instruments, the nation's largest semicon- ductor manufacturer, has two plants in the United Kingdom. Motorola recently opened a large factory in Scotland that will be its European center for development of MOS technology. General Instru- ment is regarded as the British leader in the MOS field. National Semiconductor has a small MOS wafer fabrication plant in Scotland. ITT is a major producer of TTL and MOS circuits in the United Kingdom. This firm's strong position in the indus- try is partly due to the fact that it supplies tele- 122 communications equipment circuits to its subsidi- ary, STC. Other foreign subsidiaries manufacturing IC's in Britain are Mullard (Dutch) and SGS/ATES (Italian). Ferranti, GEC, and Plessey Co. are the major nationally owned IC manufacturers. They do not have a strong position in the market, however. Government efforts to encourage development of advanced IC capability by national firms have not been totally satisfactory. The Government now plans to provide $24 million over the next 6 years to help the three leading British producers develop more competitive products. Approximately 50% of Britain's IC requirements are satisfied by imports. The United States was the leading foreign supplier in 1972, with a 36% share of total imports; Singapore was second, with 25% of the total, followed by Germany, with a 13% share. Diodes and rectifiers. — Annual production of di- odes and rectifiers in the United Kingdom reached nearly $61 million in 1973. It is forecast to ap- proach $70 million by 1977. Exports were valued at $9 million in 1973 and are expected to remain at the same level during the 1973-77 period. The domestic industry is notably stronger in the production of higher power devices, for which it meets about two-thirds of home demand. The ma- jority of imports (85 to 90%) are low-current de- vices, such as voltage reference and regulator diodes and other diodes and rectifiers rated at less than 0.5 amperes. The United States is the principal foreign supplier of these components to the United Kingdom; in 1972, the United States held a 46% share ($8.7 million) of the import market. The Netherlands and Germany ranked second and third, with shares of 20% and 10%, respectively. Major manufacturers of diodes and rectifiers in the United Kingdom include: AEI Semiconductors, Ltd.; Ferranti, Ltd.; Westinghouse Brake and Sig- nal; and J. Lucas (Electrical), Ltd. Motorola Semiconductors and Texas Instruments, the two largest American-owned manufacturers, to- gether account for 35 to 40% of British output for home consumption. Other important U.S. manufac- turing subsidiaries are International Rectifier Co. (Great Britain), Ltd., and ITT Components Group Europe. Mullard is the only other major foreign- owned firm manufacturing diodes and rectifiers in Britain. Transistors. — Almost all British transistor pro- duction is of devices in the low-to-medium power range. This has opened the market to substantial imports of high-power transistors. In fact, over half of Britain's purchases of transistors in 1973 were supplied by imports, of which roughly 90% were silicon devices. The United States is the leading foreign supplier, with a 19% share of the import market, followed by France and Singapore, each with 13%, and Belgium and Germany, each with a 10% share. United Kingdom transistor production, totaling $62 million in 1973, is expected to slip to less than $60 million by 1977. Concurrently, exports are fore- cast to decline from $27 million to $23 million. Major British transistor manufacturers are Fer- ranti and Westinghouse Brake and Signal. ITT Components Group Europe, Texas Instruments, and Motorola Semiconductors are the leading U.S. manu- facturing subsidiaries; Mullard and SGS/ATES are the other principal foreign-owned firms in the in- dustry. The American subsidiaries account for 45 to 50% of the British transistor production for domestic consumption. Resistors.— Production of resistors is expected to grow moderately at an average annual rate of al- most 6%, climbing from $56 million in 1973 to $70 million in 1977. Exports, currently representing about 20% of total production, are expected to grow at an average rate of 10% a year, raising export sales from $12 million in 1973 to $17 million in 1977. The leading manufacturers in the British resistor industry are: A.B. Electronic Components, Ltd.; Ferranti, Ltd.; Penny & Giles Group; and Welwyn Electric, Ltd. Principal American subsidiaries manu- facturing resistors in the United Kingdom are: Allen-Bradley U.K., Ltd.; Bourns (Trimpot), Ltd.; and Beckman Instruments, Ltd. U.S. manufactur- ing subsidiaries account for 50 to 60% of British resistor production for home consumption. Imports of resistors currently account for just over one-third of total domestic sales. This propor- tion is expected to increase, however, due to reduc- tions in the tariff applied to resistors imported from the European Economic Community (EEC) mem- ber countries. The U.S. share of the 1972 import market was 19%, which was second to the Nether- lands' 19.4% share and ahead of Germany's 14% and Denmark's 8.5% shares. Market considerations. — British end-users usually buy components from the supplier offering the best product at the lowest price. This policy is even followed by the equipment divisions of large com- panies with their own component manufacturing subsidiaries. However, some U.S. subsidiaries and licensees "buy-British" wherever possible, as a pub- lic relations gesture. Also, the specifications for equipment for many Government projects, including military programs, require that the components used must be manufactured or assembled in the United Kingdom, although not necessarily by British-owned firms. 123 Import duties. — Under the terms of its entry into the EEC, the United Kingdom must reduce the cus- toms duties on electronic components imported from the nine EEC member countries by 20% each year until the duties are completely abolished by July I, 1977. At the same time, Britain must bring the customs tariffs applicable to electronic com- ponents imported from nonmembcr countries, in- cluding the United States, into line with the EEC Common External Customs Tariff rates. The align- ment, begun in January 1973, is to be completed by the end of 1977. The current customs duty rates applicable to elec- tronic components entering Britain from the United States range from 8 to 20%, based on the cost, insurance, and freight (c.i.f.) values. Information on official duty rates applicable to specific products within the product category may be obtained from the U.S. Department of Commerce, Domestic and International Business Administration, Room 4217. Main Commerce, Washington. DC. 20230. Both locally produced and imported electronic components are also subject to a 10% value-added tax. This is assessed on the imported product's duty-paid value. Technical Requirements The electrical power supply characteristics in the United Kingdom are 240/415 volts, 50 hertz, single or 3-phase. The metric system of weights and measures will replace the traditional "English" system by 1975. Though the old system is still prevalent in everyday life, industry is rapidly effecting the changeover. The British Standards Institute and members of the British electronics industry have been working since 1 965 on a system of common standards for electronic components for military and industrial use. Called the BS9000 system, it sets certain mini- mum standards of quality, reliability, and safety that components must meet. The system has gained wide acceptance in the United Kingdom. Published na- tional standards for electronic components in the United Kingdom may be obtained through the American National Standards Institute, Inc., 1430 Broadway. New York. N.Y. 10018. The following market research study, upon which this Country Market Survey is based, is available on loan from the U.S. Department of Commerce, Do- mestic and International Business Administration, Room 16I7M, Main Commerce, Washington, D.C. 20230: "The Market for Electronic Components in the United Kingdom," DIB 74-02-508, November 1973. 124 HI. Country Market Briefs Abbreviated surveys of five additional country markets for selected groups of electronic components are contained in this section. These Country Market Briefs are based on reports prepared by the commercial sections of the U.S. Embassies and Consulates in the countries surveyed. The Country Market Briefs include information similar to that con- tained in the Country Market Surveys and, to the extent possible, follow the same format. 125 Argentina The market for electronic components in Argen- tina totaled approximately $60 million in 1972. Sales of the selected groups of components covered in this report1 were estimated at $14.1 million (see table 1). Purchases of these components are ex- pected to rise at an average rate of 11.6% per year, from about $15 million in 1973 to more than $23 million in 1977 (see table 2). The market for integrated circuits is expected to demonstrate the fastest growth rate — an average of over 18% annually — climbing from $1.2 million in 1973 to almost $2.4 million in 1977. Sales of tran- sistors are forecast to increase at an average annual rate of 15%, rising from $3.7 million to more than $6.5 million during the same period. The markets for resistors and capacitors are each projected to increase at an annual rate of about 9.5% through 1977. U.S. exports of product category components to Argentina in 1972 totaled $849,000 (see table 3). Sales Opportunities Knowledgeable industry sources indicate that good sales potential exists in Argentina for the following U.S. -made electronic components: Capacitors • Fixed electrolytic • Fixed ceramic • Variable Transistors • General purpose silicon, small signal and power • Switching silicon, small signal and power • Special purpose silicon, small signal and power Resistors • Fixed composition • Fixed wirewound • Variable Diodes and Rectifiers • Silicon diodes • Silicon zener diodes • Diode arrays • Power rectifiers Integrated circuits • Linear 1 Electronic components covered in this report are basically con- fined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product cate- gory" as used in this publication is limited to these six groups of components. Other electronic components • Cathode ray picture tubes • Cathode ray industrial and special purpose tubes • Silicon controlled rectifiers • Electromagnetic relays Table 1 . — Argentina: Size of market1 for selected groups of electronic components, 1972 (in thousands of U.S. dollars) Production Resistors 650 2 Capacitors 3,500 Color TV picture tubes . — Diodes and rectifiers . . 200 Transistors 2,300 Integrated circuits .... — TOTAL 6,650 Market Imports Exports Size 1,685 46 2,289 2,959 499 5,960 1,300 140 1,360 1,600 472 3,428 N.A. N.A. 1,100 14,137 1 Size of market equals production plus imports minus exports. Parts and accessories not included. 2 Production figures include a small amount (no more than 10% ) of resistors manufactured by OEMs, for their own use. Source: U.S. Department of Commerce, Bureau of International Commerce market survey Table 2. — Argentina: Size of market for selected groups of electronic components,1 1972-73 and projected 1975 and 1977 (in thousands of U.S. dollars) Description Resistors Capacitors Color TV picture tubes Diodes and rectifiers . . Transistors Integrated circuits 1972 1973 1975 1977 2,289 2,340 2,690 3,360 5,960 6,240 7,180 8,970 1,360 3,428 1,100 1,400 3,740 1,210 1,540 4,680 1,570 1,930 6,550 2,360 TOTAL 14,137 14,930 17,660 23,170 1 Parts and accessories not included. . Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Table 3. — U.S. exports to Argentina of selected groups of electronic components,1 1972 (in thousands of U.S. dollars) Description Resistors 54 Capacitors 191 Color TV picture tubes — Diodes and rectifiers 153 Transistors 172 Integrated circuits 279 Total 849 1 Parts and accessories not included. Source: U.S. Exports, Commodity by Country, FT-410, December, 1972, U.S. Bureau of the Census. 127 Because Argentina's production meets all or most of the demand for a number of basic electronic components required by domestic consumer products manufacturers, and because Argentina accords com- ponent manufacturers in Brazil and Mexico pref- erential tariff treatment, U.S. suppliers will find it more profitable to concentrate their efforts on selling high technology components in this market. The two component groups considered to offer the most promising sales opportunities to American suppliers are integrated circuits and transistors. Selected End-User Industries The consumer products sector, with 1972 sales of approximately $150 million, is the largest and fastest growing sector in Argentina's electronics in- dustry. The radio and television industry is the best market for electronic components within the con- sumer products sector. The only other important subsector is the audio equipment industry. There are no pocket calculators or electronic watches made in Argentina at present. The production of electronic photographic equipment is insignificant. The consumer products sector includes 110 to 120 firms that together employ roughly 7,000 per- sons. In addition, an indeterminate number of workers assemble products in "garage-type" opera- tions. Output in 1972 comprised 900,000 transistor radios, 380,000 black and white TV sets, 260,000 record players, 208,000 automobile radios, 143,000 tape recorders, 113,000 home radios, 110,000 modular hi-fi's, and 100,000 consoles. Growth prospects for the consumer products sector during the next several years are fairly good. Industry sources predict a 5 to 7% growth in 1974 and are optimistic that this rate of growth can be maintained or exceeded through 1977. One of the most interesting and most important facts about the production of radios and televisions in Argentina is that so many of the units produced are assembled on a cottage industry basis. Some trade sources estimate that "moonlighters" and "one- room operations" account for as much as 20% of all television sets produced in Argentina. The industry also has many small and medium-size producers and a few large ones. According to a 1970 directory of the electronics and communications industry, there were 94 companies producing television sets. Most of these firms also produce home and/or car radios. A list of the leading television receiver manu- facturers, with an indication of their ownership and their respective shares of total production, is pre- sented in table 4. Nearly 50% of the television sets produced in 1972 were partially transistorized; relatively few were fully transistorized. However, there is a strong move by all major producers to incorporate tran- Table 4. — Argentina: Market shares of total production of TV sets by major manufacturers, 1972 Share of total production Firm Ownership (percent) Philips Argentina S.A Dutch 9.2 Philco Argentina SA U.S. 6.5 Noblex Argentina S.A.C.E.I. . . . National 5.2 Televa S.A.I.C.I.F National 4.7 (Licensee of CBS) Boris Garfunkel e Hijos S.A. . . . National 3.9 (Licensee of Motorola) Tel-Rad S.A National 3.9 (Licensee of Stromberg- Carlson) Telesud S.A National 2.9 (Licensee of Zenith) Source: U.S. Department of Commerce, Bureau of International Commerce market survey. sistors in their designs. In addition, it appears that local producers will soon begin using integrated circuits in television receiver circuitry in significant amounts. The great majority of radios produced in Argentina are transistorized. Competitive Environment There are 50 to 60 electronic component manu- facturers in Argentina, with a total labor force of between 2,200 and 2,400 persons. A considerable number of these are very small companies that are marginally solvent. About 20 major producers account for at least 80% of the value of all electronic components manufactured in Argentina. Although a wide range of electronic components are produced in Argentina, the types manufactured in sufficient quantity to meet the domestic needs are limited. These items include black-and-white TV picture tubes, yokes, volume controls, tuners, fixed polyester and film capacitors, ceramic "plate" capacitors, coils, transformers (including flyback transformers), printed circuit boards, connectors, mechanical switches, and certain types of receiving tubes. Production of these components is tailored to the needs of local consumer products manufac- turers. The only active components presently produced in large quantities are transistors. They are assem- bled locally from imported materials. However, several manufacturers plan to begin production during 1974 of MOS digital and linear integrated circuits, power transistors, Darlington amplifiers, silicon controlled rectifiers, and bi-directional tri- odes. The production process, like that for most other components, will largely consist of the assem- bly of imported parts and materials. One of the more striking illustrations of the 128 dependence on imported materials occurs in the production of cathode ray picture tubes. All the glass envelopes are imported from Brazil. The electron guns are purchased from Brazil, the United States, or Holland, depending on the manufacturer. By far the largest number of component manu- facturers are of local ownership, but many of these make their products under license from foreign firms. Domestically owned firms account for about 50% of the value of component production. However, the largest and most efficient firms, with one or two exceptions, are foreign subsidiaries. The large foreign-owned firms are also the most successful in the exporting field. Exports of electronic components have not been significant. Now the Government is providing attrac- tive export incentives that should lead to an expan- sion in overseas sales. The firms that use advanced technology and have modern production equipment that can produce large runs of a standardized product are expected to benefit under the program. U.S. suppliers of electronic components are at a disadvantage because of the special agreements which have been negotiated under the LAFTA (Latin America Free Trade Association) umbrella. Under these agreements, Argentina and other LAFTA members 1, most importantly Brazil and Mexico, have eliminated or greatly reduced their duties on imports of many electronic components from the other signatories to the agreements. Consequently, the greatest sales potential for U.S. exporters exists for sophisticated components not produced on a large scale in Argentina, Brazil or Mexico. A rapid rate of expansion from its current small base is anticipated for the advanced com- ponentry market during the next 5 years. U.S. manufacturers, as the forerunners in the electronic components field, can reap the benefits of their competitive edge in this growth market. Argentina — -Selected (1972) Indicators Gross domestic product : $23.5 billion Population: 23,950,000 Total country imports: $1.9 billion Imports from U.S. (w/share of total): $0.4 billion (21.1%) Total country exports: $1.9 billion Exports to U.S. 1 (w/share of total): $0.2 billion (10.5%) Exchange rate (May 1974): 9.80 pesos=US$l 1 LAFTA members are Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela. 129 India The total market for electronic components in India is expected to rise at an average annual rate of 28%, from $105 million in Indian fiscal year (IFY) 1 1975 to $220 million in 1978. This growth will be generated by government-encouraged expan- sion of the domestic electronics industry, particularly in the fields of telecommunications and data processing. Sales of the selected groups of electronic com- ponents covered in this report 2 totaled $21.1 million in 1972 (see table 1). The market for these products is forecast to grow at a much higher rate than that of the market for all electronic components. Pro- jections indicate an average increase of 41% per year during the 1975-78 period, with sales rising from about $32 million to over $90 million (see table 2). Imports of electronic components within the product category totaled $5.6 million in 1972. Nearly one-third of these imports, or $1.7 million worth, came from the United States (see table 3). Table 1. — India: Size of market ' for selected groups of electronic components, 1972 (in thousands of U.S. dollars) Market Description Production2 Imports Exports Size Resistors 1,480 1,500 23 2,957 Capacitors 5,020 1,680 5 6,695 Color TV picture tubes — — — — Transistors, Diodes and Rectifiers 8,933 2,060 405 10,588 Integrated circuits ... 536 350 — 886 Total 15,969 5,590 433 21,126 1 Size of market equals production plus imports minus exports. Parts and accessories not included. - Production figures include components manufactured by OEMs, for their use. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Sales Opportunities A market survey recently conducted in India for the U.S. Department of Commerce, Office of International Marketing, reveals that favorable sales opportunities exist for American exporters of the following electronic components: •Indian fiscal year is from April 1 through March 31. All figures, except those for 1972, are based on IFY. Figures for 1972 are based on the calendar year. 2 Electronic components covered in this report are basically confined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product category" as used in this publication is limited to these six groups of components. Table 2. — India: Size of market for selected groups of electronic components,1 1975-78 (in thousands of U.S. dollars) Description 1975 1976 1977 1978 Resistors 6,000 7,600 11,300 16,000 Capacitors 7,800 9,350 14,500 21,000 Color TV picture tubes . . — — — — Transistors, Diodes and Rectifiers 15,500 19,500 29,000 40,750 Integrated circuits 2,800 4,480 7,500 12,610 Total 32,100 40,930 62,300 90,360 1 Parts and accessories not included. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Table 3. — India: Imports from the United States, and U.S. share of total imports, of selected groups of electronic components,1 1972 (quantity in thousands of units and value in thousands of U.S. dollars) U.S. share Description Quantity Value (percent) Resistors 2,662 206 13.7 Capacitors 1,801 465 27.7 Color TV picture tubes ... — — — Diodes and rectifiers 110 275 49.1 Transistors 366 524 34.9 Integrated circuits 185 277 79.1 Total 5,124 1,747 31.3 1 Parts and accessories not included. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Transistors, diodes and rectifiers. — Indian imports of transistors in 1972 totaled $1.5 million; imports of diodes and rectifiers amounted to $560,000. American firms presently supply about 35% of the transistor imports and 50% of imports of diodes and rectifiers. The total market for these components is expected to rise from about $15 million in 1975 to over $40 million in 1978, an average annual increase of 38%. Products offering the highest sales potential to U.S. exporters include: • Low power silicon transistors • High power silicon transistors • Varicap diodes • Silicon zener diodes The market for transistors is expanding rapidly. While local production meets the requirements of the consumer electronic products manufacturers, a 130 large gap exists between local demand and supply of advanced transistors for industrial and defense applications. This gap is expected to widen further in the years ahead. Most of the requirements for discrete diodes and rectifier and switching diodes are met by local sup- pliers. Domestic production of zener diodes does not meet the total demand and imports are necessary. The demand for varicap diodes, which is filled almost entirely by imports, is fairly high and is increasing. Capacitors. — The market for capacitors in India is expected to increase at an average yearly rate of almost 40%, from $8 million in 1975 to over $20 million in 1978. U.S. manufacturers supplied 27.7% of the $1.7-million import market in 1972. Variable and ceramic capacitors offer the highest sales potential in this segment of the market. De- mand for miniature ceramic capacitors is increasing rapidly, and is expected to continue outpacing the production capacity of local suppliers for several years to come. Resistors. — Sales of resistors in 1972 totaled $3 million, with imports accounting for roughly 50% of the total. The market is expected to rise to $16 million in 1978, an increase of more than 180% from a projected $6-million level in 1975. Integrated circuits. — The market for IC's ap- proached $900,000 in 1972, and imports totaled $350,000. American manufacturers currently supply about 80% of India's IC imports. Sales of IC's should demonstrate the fastest growth of all electronic components. Based on a predicted average annual growth rate of 65%, the IC market is expected to surge from $2.8 million in 1975 to well over $12 million in 1978. In an effort to produce higher quality and more competitive products, India's electronic end product manufacturers are turning increasingly to the use of IC's. However, the variety of domestically pro- duced IC's is very limited, and those types available from local suppliers are generally based on chips diffused abroad. Local manufacturers obviously do not have the production capability or range of products required to meet OEM needs for IC's. Imports therefore are expected to account for the bulk of the Indian market for IC's in the next 5 years. Linear and digital IC's will be in greatest demand. Other electronic components. — Electronic com- ponents outside the product category expected to have high sales potential during the next 5 years include: • Electron tubes • Black-and-white TV picture tubes • Thyristors • Printed circuit connectors • Microwave connectors • Mercury wetted and dry reed electromagnetic relays Selected End-User Industries India has a planned economy. Growth of indus- trial activity is carefully monitored and controlled by various government agencies to ensure that in- dustrial investment has a maximum impact on the country's social and economic development. In keeping with this policy, more resources have been channeled toward the capital goods industries than the consumer goods sector. Development of the electronics industry has re- ceived special governmental attention in recent years. There is a section (Department of Electronics) within the Government that regulates and promotes the growth of the electronics industry. The government has also instituted an Electronics Commission, head- quartered in Bombay, which is responsible for chart- ing the course of India's progress in electronics. It is quite clear, from the activities of these reg- ulatory and advisory bodies, that government em- phasis will be in the development of the industrial and not the consumer electronic products sector. The consumer products sector today is still the largest segment of the electronics industry, but cur- rent trends indicate that this position is going to change radically in the next few years. The projected annual production of India's three major electronic components user sectors are shown below, in millions of U.S. dollars. Sector 1975 1976 1977 Consumer products 117 132 157 Industrial /commercial equipment . . 142 193 263 Military equipment 93 115 152 Total 352 440 572 The government plans an investment of approxi- mately $570 million in the electronics industry during the Fifth Plan period (1974-79) in order to reduce dependence on imported equipment and components. A breakdown of these planned ex- penditures and the estimated value of required im- ports of equipment and components for each sector of the electronics industry is presented below, in millions of U.S. dollars. Imported equipment/ Sector Investment components needed Consumer products 20 6 Industrial /commercial equipment 450 200 Military equipment 100 45 Total 570 251 In order to boost the growth of the electronics industry, the government-organized Trade Develop- ment Authority has, with the help of the Electronic Commission, begun work on a project for the estab- lishment of a duty-free export processing zone to be devoted exclusively to the development of ex- ports of electronic equipment and components. Current plans aim for an export target of $100 million annually over the next four years. 131 Industrial/Commercial Equipment Sector. — The primary product areas within this sector where sub- stantial growth in expected are telecommunications equipment, computers, and industrial controls. Telecommunications equipment. — The telecom- munications equipment industry is a rapidly growing market for electronic components. Total industry output is expected to rise at an average annual rate of 17% between 1975 and 1979. Indian trade sources forecast that the industry's annual output will surge from $105 million to $300 million during this period. The Indian telecommunications system is con- trolled by the Government's Posts, Telephone, and Telegraph (PTT) authority. India had only 86,000 telephones in 1947 compared to 1,400,000 in 1973. The PTT has undertaken an ambitious program of expansion of telecommunications facilities. Most of the towns and cities in India are expected to be connected by coaxial cable links by the end of the Fifth Plan (1974-79) period. The hilly terrain of Jammu and Kashmir and the North Eastern region have already been connected with the rest of the country by microwave radio links. Many more microwave link projects are either underway or will be undertaken in the next five years. The major suppliers of equipment to the PTT are Indian Telephone Industries Limited (ITI), Bangalore; Hindustan Teleprinters Limited (HTL), Madras; and Hindustan Cables Limited (HCL), Roop Narianpur. ITI's main divisions include the Strowger Divi- sion, which in 1973 produced 128,000 exchange lines and 265,000 telephone instruments; the Cross- bar Division, which manufactured 94,000 lines valued at $15 million in 1973; and the Transmis- sion Division, with 1973 production valued at $12 million. These three divisions are located in Banga- lore. ITI's components factory in Srinagar produced telephone parts valued at $240,000 in 1973, and output of the firm's transmission equipment factory at Vaini totaled $2.5 million. A telephone instru- ments factory at Naini is expected to go into pro- duction shortly. HTL is engaged primarily in the development of teleprinters and ancillary equipment. This company in 1973 produced 6,042 teleprinters representing a 26.4% increase over the 1972 production of 4,779 units. HCL produced 440,000 Km of dry core cables and 1,176 Km of coaxial cables in 1972. ITT, HCL, and HTL plan to expand and diversify their production programs during the next 5 years. ITI expects to increase telephone production by 100,000 sets per year— from a level of 350,000 in 1975 to 750,000 in 1979. The company also plans to raise output of the Strowger Division from 175,000 lines in 1975 to 200,000 in 1978, and that of the Crossbar Division from 150,000 lines to 330,000 during that period. HCL plans to begin production of plastic cables and copper coated sheet wire in 1974. Output of the cables will amount to 88,000 Km per year through 1978, and that of the sheet wire will rise from 1,000 metric tons in 1974 to 2,600 tons in 1975. Production of coaxial cables will increase to 3,700 Km in 1974, and dry core cable output will climb from 1.3 million Km in 1974 to 2.3 million Km in 1978. HLT plans to make a capital investment of $4 million during the 1974-79 period. The firm expects to introduce new models of electronic typewriters of its own design, incorporating such features as memory, greater distortion margin and higher speed. Several varieties of ancillary equipment, eight-level machines for data handling, and a variety of periph- eral equipment required for computers will be man- ufactured. HTL also plans to enter into new fields, including electronic private branch exchanges and data modems. None of the three major telecommunications equipment producers (ITL, HCL and HTL) has in- house capability for development and manufacture of electronic components. However, Bharat Elec- tronics Limited (BEL), in Bangalore, designs and produces electronic components tailored to the needs of the local telecommunications equipment manu- facturers. The government has made a free foreign ex- change allocation of $7 million for imported broad- casting and telecommunications equipment during 1974. In addition, a project loan of $80 million from the IDA (IBRD's soft lending agency) was made available for expansion of telecommunications facilities in India during the same period. Computers and related equipment. — The growth of computer application in India, though slow at first, is picking up rapidly. The first computer was installed in India about 20 years ago. The country's computer population totaled 184 as of June 1972 and, with few exceptions, these were of foreign origin, IBM accounts for 75% of the installations; ICL (England), 13.5%; and Honeywell, 5.5%. The remaining machines were supplied by Control Data Corporation, Hewlett-Packard, Digital Equipment Corporation, and Russia's Minsk. There is considerable interest in development of a domestic computer manufacturing capability. The Electronics Corporation of India Limited, Hydera- bad, a public sector establishment, has now em- barked upon the manufacture of medium-size computers (TDC-12, TDC-16 and TDC-32). The Electronics Commission has recommended that minicomputers be manufactured in the private sector, and two applications for licenses already have been submitted to the Government The minicomputer manufacturers will require a substantial amount of imported components such as MOS/LSFs, 132 Electronics Manufacturers' Profiles The two largest producers of electronic end products and components in India are Bharat Elec- tronics Ltd. and Electronics Corporation of India Ltd. Bharat Electronics Ltd. (BEL), located in Banga- lore, manufactures 40 different types of electronic equipment, including sophisticated and specialized transceivers, transmitters and radars. Components produced by this firm include capacitors, electron tubes, semiconductor devices, transistors, connectors and crystals. The gross value of production showed a tenfold rise during the 10-year period ended March 31, 1971. BEL has a well equipped research and develop- ment organization. It has developed 14 types of receiving tubes, five types of cathode ray tubes, one type of X-ray tube, and five types of transmitting tubes. The company has manufactured storm warn- ing radars, and a cyclone warning radar is expected to be ready for installation in 1974. Among many new items being developed are a complete range of HF, VHF and UHF communications equipment. The company has placed orders for plant and machinery for the production of TV picture tubes under license arrangements with Nippon Electric Company, Japan. It recently commenced manufac- ture of integrated circuits in collaboration with Radio Corporation of America. BEL plans to begin manufacturing TV transmis- sion and studio equipment in collaboration with Nippon Electric Company, and with Fernsch of Germany. It also proposes to manufacture 30,000 TV receivers a year. Another new project to be taken up by BEL is the production of a desk calculator which has been developed in collaboration with the Jadavpur University. The company's new $15-million plant facility at Ghaziabad in Uttar Pradesh commenced production of surveillance radars and microwave communica- tions equipment in December 1973. Electronics Corporation of India Ltd. (ECIL), in Cherlapali, produces a wide range of sophisticated electronic equipment. ECIL's total production rose 62% between 1970 and 1971, to $2.7 million. In 1968, the first year of production, the value of finished output was $200,000. The company's man- ufacturing activities are mainly spread over eight divisions, namely the Nuclear and Allied Instrumen- tation Division, Resistors and Capacitors Division, Semi-conductors Division, Power Reactor Instru- mentation Division, Servo Controls Division, Com- puter Division, Microwave Division, and Special Products Division. The Nuclear and Allied Instrumentation Division has established itself as India's premier source of modern transistorized modular nuclear instrumenta- tion, high performance oscilloscopes, closed-circuit television equipment, and medical electronic equip- ment. The division produced goods worth $1.2 million in 1971. The products turned out by the Resistors and Capacitors Division and Semi-conductors Division include electronic components such as carbon and metal film resistors, solid tantalum capacitors, vari- able wirewound resistors, zener diodes, germanium power transistors, and thermoelectric cooling mod- ules. The production of goods from these divisions in 1971 was valued at $300,000. The Servo Controls Division, which has concen- trated its main effort on the development and pro- duction of India's first small AC gear motor, the AC510, went into commercial production during the final quarter of 1971. The production from the division was valued at $100,000, which included the value of X-Y plotters supplied to the Power Reactor Instrumentation Division. The Power Reactor Instrumentation Division made substantial progress during 1970 and 1971. This division manufactured and supplied to the Rajasthan Atomic Power Project site the solid- state logic and control equipment for the fuel handling mechanisms. Value of work completed at this division during 1971 was $600,000. ECIL continues to receive orders for providing instrumen- tation and control systems for new nuclear power stations and allied plants being set up in various parts of the country. The Computer Division of the company distin- guished itself in 1971 by producing India's first on-line digital computer, as well as by supplying a variety of software facilities to enable users to effectively utilize such computers. The division turned out products worth $200,000 in 1971. The activities of the Microwave Division during 1971 were concentrated on the development and engineering of various microwave test instruments and components for commercial production. A new division known as "Special Products Divi- sion" was established in 1971 for the manufacture on a commercial scale of a sophisticated product for defense requirements. The company's new Television Division has just started manufacturing commercial television sets. The production activity includes manufacture of only a few critical components besides assembly and testing. Most of the remaining components and sub- assemblies are secured from the other divisions of ECIL. ECIL has formulated and submitted to the gov- ernment a 5-year expansion program under which the cumulative capital investment by the end of 1976 would reach $15.3 million, with an employ- ment potential of 5,200 workers. A sales target of $30 million is expected to be achieved in 1976. The expansion program has been approved by the 133 Atomic Energy Commission, the Electronics Com- mission, and the Planning Commission. A significant feature of the expansion plan is the role played by the corporation in the development and manufacture of small and medium-size computers. The company hopes to produce over $6.7 million worth of com- puters in 1976. The Competitive Environment The components sector of the Indian electronics industry is presently growing at a slower rate than the equipment sectors, although planners recognize the need to base their production of electronic products on a well developed system of domestic components manufacture. Production of electronic components in India in- creased from $660,000 in 1960 to about $36 million in 1972 (see table 4), and it is expected to reach a yearly level of $175 million by 1979. Knowledge- able government and industry sources estimate that about 80% of the components for the consumer electronics sector are supplied by local industry. However, production of high performance type com- ponents for industrial applications has grown slowly, and the gap between demand and local supply is, in fact, increasing. India's total 1972 exports of components within the product category amounted to $432,500. There are approximately 45 major manufacturers of electronic components in India. Among the im- portant locally owned firms, with the types of com- ponents they manufacture shown in parentheses, are R. V. Mehta & Sons, Calcutta (resistors); National Electronics Pub. Ltd., Baroda (resistors); Atlas Radio and Electronic Industries Pub. Ltd., New Delhi (capacitors); Bolton Industrial Corporation, New Delhi (capacitors); Uranus Electrotechnik Pub. Ltd., Bombay (capacitors); Hindustan Con- ductors Pub. Ltd., Bombay (diodes, transistors, integrated circuits); and Usha Rectifier Corporation (India) Limited, Haryana (rectifiers). Most of the concerns manufacturing electronic components in India rely heavily on imported "know- how" and capital. A majority of them have licensing agreements with foreign companies. Approximately a dozen American electronic com- ponent manufacturers have financial and technical agreements with Indian firms. Industry sources in- dicate that manufacturing licensees of U.S. firms share about 30% of the domestic market. Major U.S. suppliers of electronic components to India include RCA and General Electric (electron tubes); International Rectifier, Westinghouse and Motorola (thyristors); Texas Instruments, National Semiconductors, Fairchild Camera and Instruments, American Micro Systems, Intel, and Arrow Inter- national (integrated circuits); and Hewlett-Packard, Litronix, Monsanto, Unipage International, and Motorola (special semiconductor devices). Table 4. — India: Production of electronic components, 1972 (quantity in single units and value in thousands of U.S. dollars) Component Quantity Value Electron tubes Receiving 5,020,000 3,000 Transmitting 11,800 1,000 TV picture 27,000 1,420 Cathode ray 1,085,000 40 Microwave 120 170 X-ray 1,186 590 Semiconductor devices Transistors, diodes and rectifiers 38,000,000 8,933 Integrated circuits 200,000 536 Fixed resistors Carbon film 67,500,000 650 Variable resistors 4,500,000 830 Fixed capacitors Paper 4,700,000 280 Ceramic 38,300,000 800 Plastic film 24,000,000 1,330 Electrolytic 10,000,000 1,080 Mica/silver mica 1,400,000 200 Variable capacitors 2,300,000 1,330 Connectors, relays and switches . . — 4,530 Crystals 220,000 1,520 Transformers, chokes and coils . . — 8,000 TOTAL 36,239 Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Other important foreign suppliers include Philips of Holland; BTM-ITT, Belgium; CSF Thompson, France; Mullard, Plessey, and Redifon, United Kingdom; Nippon Electric and Fujitsu, Japan; and Siemens, Germany. Import duties. — India levies an import duty of 40% ad valorem on electronic components and 65 % on electronic end products. All imports into India are regulated, and licenses are issued depending on the availability of foreign exchange. Preference in granting import licenses is given to rupee payment sources and to countries which provide bilateral aid credits. India — Selected Indicators (IFY1 1973) Gross national product: $63.6 billion Population (1971): 563 million Total country imports: $2.4 billion Imports from U.S. (w /share of total): $298 million (12.4%) Total country exports: $2.6 billion Exports to U.S. (w /share of total): $363 million (14.0%) Exchange rate (May 1974): 7.60 rupees=US$l j ; * Indian fiscal year: April-March ^^^m 134 Korea Continued rapid growth in Korea's production of electronic end-products is expected to boost the country's total market for electronic components and parts an average of over 35% annually during the next 4 years. Based on this forecast, annual sales of components and parts in 1977 should approach $610 million, up from $175.2 million in 1973 and $103.9 million in 1972 (see table 1). Korea's imports of electronic components and parts rose 55% from 1972 ($80 million) to 1973 ($124.4 million). Imports, growing at an average annual rate of about 30% from the 1973 level, are expected to exceed $345 million in 1977. The 1972 market for the selected groups of electronic components covered in this report 1 totaled $24.7 million (see table 2). Sales of these com- ponents are forecast to increase threefold during the 1973-77 period, exceeding $75 million in the latter year. Imports, valued at $12.1 million, accounted for 49% of Korea's 1972 market for product category Table 1. — Korea: Size of market1 for electronic components, 1972-77. Description 1972 1973 1977 Production 127.1 229.0 695.8 Imports 80.0 124,4 346,4 Exports 103.2 178.2 433.9 Market size 103.9 175.2 608.3 1 Size of market equals production plus imports minus exports. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Table 2. — Korea: Size of market1 for selected groups of electronic components, 1972 (in millions of U.S. dollars) Market Production Imports Exports Size Resistors 2.6 1.5 2.4 1.7 Capacitors 6.0 2 1.7 3.9 3.8 Diodes and rectifiers . .3 .8 .2 .9 Transistors 26.6 2 2.3 25.8 3.1 Integrated circuits . . . 48.8 5.8 39.4 15.2 Total 84.3 12.1 71.7 24.7 1 Size of market equals production plus imports minus exports. Parts and accessories not included. 2 Production figures include components manufactured by OEM's for their own use. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. 1 Electronic components covered in this report are basically con- fined to resistors, capacitors, color TV picture tubes, diodes and rectifiers, transistors, and integrated circuits. The term "product cate- gory" as used in this publication is confined mainly to these six groups of components. components. If industry predictions hold, imports of such components should approach the $40-million level in 1977. Korean purchases of U.S. -made product category components in 1972 amounted to $4.6 million, or 38% of the import market (see table 3). Imports from the United States, spurred by the Korean electronics industry's increasing needs for advanced components, are expected to triple to $15 million in 1977. Table 3. — Korea: Imports from the United States, and U.S. share of total imports, of selected groups of electronic components, 19721 (in thousands of U.S. dollars) U.S. share Description Value (percent) Resistors 71 5 Capacitors 49 3 Diodes and rectifiers 123 16 Transistors 151 7 Integrated circuits 4,175 72 Total 4,569 38 1 Parts and accessories not included. Source: U.S. Department of Commerce, Bureau of International Commerce market survey. Sales Opportunities Components manufactured by U.S. firms are highly regarded in Korea for their quality and spe- cialization. Favorable sales opportunities exist for U.S. exporters of the following electronic com- ponents: Integrated circuits. — Sales of integrated circuits in Korea totaled $15.2 million in 1972. Imports amounted to $5.8 million, of which the U.S. share was $4.2 million, or over 70% . Demand for IC's, particularly C/MOS digital and single chip MOS/LSI's, is expected to increase significantly starting in 1974 as Korean manufac- turers step up production of electronic calculators and clocks. Good sales prospects also exist for suppliers of MSI bipolar digital and linear IC's and power Darlingtons. Capacitors. — Purchases of capacitors in 1972 amounted to $3.8 million. Imports were valued at $1.7 million, of which the U.S. share was a modest 3%. Demand for tantalum and mica capacitors is particularly high and is expected to rise sharply in the next several years. Sales of fixed electrolytic 135 and fixed paper and film capacitors also are expected to accelerate through 1977. Transistors. — The Korean market for transistors in 1972 was valued at $3.1 million. Purchases from the United States amounted to $151,000, or 7% of the $2.3-million import market. Imports of transistors are expected to increase considerably in the years just ahead. Greatest de- mand exists for silicon power transistors utilized in the manufacture of switching drives for calculators. Sales prospects also are good for silicon small signal and general purpose transistors and germanium power transistors. Resistors. — Korea's electronics industry depends on imports to meet its requirements for high quality resistors used in the manufacture of electronic prod- ucts for export. Imports were valued at $1.5 million in 1972, accounting for most of the total market of $1.7 million. Although American-made products are much preferred, the U.S. share of 1972 imports was only 5%. Trade sources attribute this situation in large measure to the fact that U.S. suppliers are not adequately represented in Korea. American manu- facturers are said to have the potential to obtain a much larger share of the markets for fixed compo- sition resistors and for fixed film and variable resistors. Diodes and rectifiers. — Imports of diodes and rectifiers in 1972 amounted to $746,000, of which the U.S. share was $123,000, or 16.5%. Total sales in that year were valued at $915,000. Demand will be rising in the next several years, particularly for the following devices: Silicon diodes, used for production of diode arrays; zener diodes, for production of a wide variety of industrial elec- tronic equipment, but especially regulators; and gallium arsenide diodes, for increasing production of switchboards and telephone exchanges. American suppliers also can expect higher sales of germanium diodes (IN34 and IN60) and silicon controlled and power rectifiers. Other electronic components. — Although U.S. exports to Korea and the following components out- side the product category are presently low or non- existent, the anticipated increase in demand for them is expected to offer American manufacturers promising sales opportunities: • Light-emitting diodes • Dry reed relays • Thermistors • Varistors • Liquid crystal display components • Coaxial connectors • Slide and rotary mechanical switches Selected End-User Industries Korea's production of finished electronic products in 1973 was valued at almost $180 million. Output is expected to increase at an average annual rate of 53% during the next 4 years, and to exceed $980 million in 1977. Production of consumer electronic products, estimated at $138 million in 1973, should grow an average of 54% a year to more than $780 million in 1977. Exports of these products during the same 4-year period are expected to rise from approxi- mately $84 million to $515 million. Industrial electronic equipment output should increase at an average annual rate of 48%, rising sharply from $40 million in 1973 to more than $190 million in 1977. Some idea of the relative importance of sectors within the Korean electronics industry can be ob- tained from the following statistics on 1972 output of electronic end-products: Value Consumer electronic products ($ Million) TV receivers (black-and-white) 33.0 Radio receivers 12.1 Cassette tape recorders 7.4 Amplifiers 1.1 Other 1.7 Total 55.3 Industrial electronic products Automatic switchboards and exchanges . 12.3 Electronic calculating machines 2.1 Automatic telephone sets 1.9 Terminal equipment for carrier- current systems 1.4 MW transceivers 1.0 Indicating instruments 0.8 SSB transceivers 0.7 Common battery switches and exchanges 0.7 Other 4.4 Total 25.3 Market Share (Percent) 59.7 21.9 13.4 2.0 3.0 100.0 48.6 8.3 7.5 5.5 3.9 3.2 2.8 2.8 17.4 100.0 Foreign firms, through direct investment in wholly owned subsidiaries and joint ventures and through * technical licensing agreements, have played a pre- eminent role in bringing the electronics industry in Korea to its present level of production. As of June 30, 1973, foreign equity investments totaling over $86 million had been approved for 120 different enterprises, as shown below (value in millions of U.S. dollars): U.S. Japan Other Total No. Value No. Value No. Value No. Value Foreign-owned subsidiaries 15 31 26 31 2 1 43 62 Joint ventures 18 6 57 15 2 3 77 24 Total .... 33 37 83 46 4 4 120 86 136 Locally owned companies account for approxi- mately 46% of Korea's total output of electronic products (including components); foreign owned subsidiaries for 35%; and joint ventures for 20%. There are some 120 firms in Korea engaged in manufacturing finished electronic products. A few large companies account for the bulk of their com- bined output. At the end of 1972, there were 42 producers of consumer electronic products and 77 makers of industrial electronic equipment. Despite some efforts to introduce advanced pro- duction methods, Korea's electronics industry is still in a very early stage of development. Its engineering and design capability has been limited primarily to simple production and assembly methods provided under technical licensing agreements, mostly with Japanese firms. Korean manufacturers rarely possess sufficient know-how to modify designs or to develop new products on their own. Government authorities have just begun to encourage improvement in this field. Korea exported slightly more than 50% * ($92 million) of its production of finished electronic products in 1973. The Korean Government has formulated specific programs under the Electronics Industry Promotion Plan designed to encourage the industry to reach an export goal of $1.8 billion in 1980. This will require a total capital outlay of close to $500 million by 1977 and nearly $1.5 billion by 1980 for the construction of approxi- mately 280 new electronic products manufacturing plants (200 for consumer products and 80 for in- dustrial equipment). An estimated 21 different elec- tronic end-products currently are produced in Korea. This number is expected to increase to 27 by 1977. Under the Electronics Industry Promotion Plan, the Government is making available to the industry low-interest, government-subsidized bank loans and is protecting it from the competition of foreign imports. The Government also is providing incen- tives to foreign firms to enter into joint ventures and technical licensing agreements with Korean companies. These incentives include tax concessions and the simplification of administrative procedures for imports and exports. Joint venture companies may also sell up to 40% of their production on the local market. The Government anticipates that its programs will further encourage industry expansion by providing improved working conditions in the industry and assuring an adequate supply of skilled manpower through training programs. Consumer products sector — Television receivers make up the largest portion, in value terms, of domestic output of consumer electronic products. They accounted for 63% of 1972 production, while radios followed with 22% of output. Approximately 700,000 black-and-white TV re- ceivers valued at $63 million were produced in Korea in 1973, compared with 360,000 sets worth $33 million produced in 1972. Output is expected to grow at an average annual rate of 30% (in value terms) during the 1973-77 period, reaching $184 million or almost $3 million sets in the latter year. Trade sources estimate that exports will account for approximately $109 million of this total and do- mestic consumption for the remaining $75 million. There is no color television transmission in Korea and there has been no domestic production of color TV receivers there. Approximately 100,000 color sets, worth over $20 million, are expected to be produced in 1974. Annual output is forecast to reach 1 million sets valued at $250 million by 1977. Four firms together account for over 80% of Korean output of monochrome TV receivers. They are Gold Star Co., Ltd., which accounts for 44% of the total; Samsung-Sanyo, with a 16% share; Tai-Han Electric Wire Co., Ltd., with 13%; and Dong-Nam Electric Ind. Co., Ltd., with 8%. Most TV set producers currently operate under licensing agreements with Japanese firms. The A- Nam Industrial Co., Ltd., recently established a $1 -million 50/50 joint venture — Korea National Electrical Equipment Co. — in association with Mitsushita Denki of Japan. This company will be the first manufacturer of color TV sets in Korea; 1974 monthly output is expected to be 10,000 sets. The Government also has approved a project for the production of 300,000 color TV sets and 120,000 black-and-white sets annually by Deahan Precision Co. under a licensing agreement with Victor of Japan. Production of radios in Korea in 1972 totaled 1.8 million units (including car radios) valued at more than $12 million; production in 1973 reached an estimated 2.5 million radios worth almost $40 million. Output is forecast to increase in value at an annual rate of 33% during the next 4 years, reach- ing well over $115 million (more than 9 million radios) in 1977. Exports in that year are expected to reach almost $100 million. Over 60% of the total output of radios is pro- duced by six companies: Gold Star Co., which accounts for 18% of total production; Shinsung Electric Co., with a 15% share; Nam-Sung Heuing Up, 10%; Dong-Nam Electric Co., 8%; Taihan Electric Wire Co., 6%; and Chun II Sa, 5%. Expansion plans call for the construction of 23 new radio manufacturing plants by 1977 and 75 plants by 1980. There are no subsidiaries or licensees of U.S. firms engaged in Korea's television and radio manu- facturing/assembly operations. Production of tape recorders, valued at $25 mil- lion in 1973, is expected to expand at an average annual rate of nearly 50% during the next 4 years. Output in 1977 should surpass $125 million, of which $95 million is expected to be exported. 137 Cassette tape recorders presently account for 99% of total tape recorder production; 8-track cartridge type sets account for most of the remainder. Output of phonographs is expected to increase an average of 85% a year during the 1973-77 period, surging from $3 million to almost $35 million. Exports in the latter year should reach $16 million. Production of amplifiers in 1973 totaled an esti- mated $5 million and is likely to increase at an average annual rate of about 50% in the next 4 years. Based on this projection, output in 1977 should reach $25 million, of which $13 million would be for local consumption and $12 million for export. Other consumer electronic products produced in Korea include tape-players (including car stereos), record players, speaker systems, hearing aids, and videotape recorders. Production of these and similar items is projected to increase from $4 million in 1973 to almost $50 million in 1977. The Competitive Environment There presently are 135 electronic components manufacturers in Korea. Trade sources estimate that $555 million will be invested in the construction of new plants by 1980. There are some 29 different types of electronic components currently manu- factured in Korea. This number is expected to in- crease to 40 by 1980. Korea's 1972 total output of electronic compon- ents was valued at $127 million. As a result of the Government's efforts to expand production for export and to increase the local content of domestically assembled electronic products, output is expected to increase at an average annual rate of more than 30% in the next several years. At this rate of growth, production in 1977 should reach close to $700 million, up from approximately $230 million in 1973. Korean exports of electronic components in 1972 totaled $103 million, of which $76 million repre- sented exports by manufacturing subsidiaries of foreign firms. Motorola Korea, Ltd., Signetics Korea Co., Ltd., and Fairchild Semiconductor (Korea) Ltd., the subsidiaries of three major U.S. firms manufacturing electronic components in Korea, ac- counted for approximately 44% ($45 million) of total 1972 exports. A-Nam Industrial Co., Ltd., the largest Korean-owned components firm, had exports totaling $10 million. Under the Government's Elec- tronics Industry Promotion Plan, exports of com- ponents are projected to rise from $178 million in 1973 to a 1977 total in excess of $430 million. Two major manufacturers of consumer electronic products in Korea, Gold Star Co. and Taihan Elec- tric Wire Company, are producing components. Gold Star Electronics Co., an affiliate of Gold Star Co., produces silicon transistors both for export and for the domestic market in technical collaboration with the U.S. firm, National Semiconductor Corpo- ration. The company plans to expand its product line to include IC's, SCR's, and diodes. Taihan Electric Wire Co. produces capacitors. About one-third of the components used in man- facturing black-and-white TV sets are produced in Korea; most of the remainder are imported from Japan. Government plans call for raising the do- mestic content of color TV sets from 25% in 1974 to 90% in 1980. Production of integrated circuits in 1972 was valued at $48.8 million, accounting for more than 38% of total output of product category com- ponents. The Korean industry manufactures digital and linear thick film and MOS IC's. Subsidiaries of Motorola and Signetics produce digital and linear IC's and account for two-thirds of total IC produc- tion. Korean Micro-Systems, Inc. is the only manu- facturer of MOS/IC's in Korea. Thick film IC's are produced by A-Nam Industrial Co. and Minsung Electronics Industrial Co., Ltd. Transistor production, valued at $26.6 million in 1972, accounted for nearly 32% of total output of product category components. Most of the pro- duction is exported. Silicon transistors account for over 99% of output; phototransistors account for the remainder. The Motorola and Fairchild sub- sidiaries produce 60% of Korea's transistor output. Trade Practices Imports of electronic components similar to types produced locally are restricted and require advance approval by the Korean Electronics Industries Asso- ciation. These restrictions are waived, however, for imports associated with foreign investment projects approved under the Foreign Capital Inducement Law, or where the locally made product does not meet the reasonable precision and quality standards for a specific application. Advance cash deposits are required prior to issuance of the letter of credit for nearly all imports made by the private sector. These deposits exceed 110% of the cost, insurance, and freight (c.i.f.) value for imports of most commodities financed with Korea's foreign exchange. Korea — The Electronics Industry (Basic Data 1972) Total value of production: $208 million Number of manufacturers: 283 i Industry labor force: 52,501 Output of principal electronic components user industries: television sets $33 million telecommunications equipment (est.) $18 million radios $12 million 138 The Netherlands Steady expansion in Dutch output of telecom- Capacitors. — The market for capacitors is pro- munications equipment, computers, and electronic jected to increase from the 1973 level of $20.8 instruments and industrial control equipment is ex- million to over $24 million in 1977. Fixed elec- pected to stimulate substantial growth in demand trolytic capacitors and fixed paper and film capacitors for electronic components in the years just ahead. will be in greatest demand. The Dutch market for the selected groups of Resistors. — Sales of resistors in the Netherlands electronic components covered in this report1 rose are forecast to advance to 25% over the period from $80 million in 1972 to over $88 million in 1973-77, rising from $15.9 million to $20 million. 1973 (see table 1). Based on a predicted average Greatest sales growth is predicted for fixed wire- annual growth rate of more than 10%, the market is bound and variable resistors, projected to exceed $135 million in 1977. Integrated Circuits. — Integrated circuits have the Dutch imports of components within the product highest sales potential of all electronic components category totaled more than $125 million in 1972. in the Dutch market. Sales should more than double Imports of capacitors were valued at $37.6 million; during the 1973-77 period, climbing from $12 color TV picture tubes, $32.6 million; transistors, million to $25 million. IC's are rapidly displacing diodes and rectifiers, $31.8 million; resistors, $16 discrete components in an ever growing range of million; and integrated circuits (IC's), $7.4 million. electronic end products manufactured in the Nether- A considerable portion of these imports were re- lands. U.S. companies and their overseas subsid- exported. iaries are the principal suppliers of IC's to Holland, U.S. manufacturers of electronic components hold with the bulk of shipments coming from the United an estimated 40% share of the total Dutch market States. Power Darlingtons and C/MOS, MSI and for semiconductors. They dominate the integrated linear IC's all have excellent sales potential, circuit market and hold strong positions in sales of Transistors. — The Dutch market for transistors power transistors, power diodes, and connectors. is expected to rise at an average annual rate of more Their share of the resistor and capacitor markets is than 11% — from $9.9 million in 1973 to over $15 modest. million in 1977. Silicon power transistors offer the •;,„,.,,,,„. , , , , best sales opportunities because of their growing Table 1. — The Netherlands: Size of market for selected • u *u ■ ,1 * • i a . j ♦ t» ♦ v. , , . i ,n71 77 use in both industrial and consumer products. Dutch groups of electronic components, 1972-77 . . ^ ^ ^ \ , .. ,„„,„. industry sources caution that the market may decline (in millions of U.S. dollars) ... . . ■. « , - ., if power transistors become outmoded by further Description 1972 1973 1974 1975 1976 1977 devFelopments fa integrated circuits. Demand for Resistors 15.0 15.9 16.9 17.9 18.9 20.0 small signal and general purpose silicon transistors Capacitors 20.0 20.8 21.6 22.5 23.4 24.4 is expected to remain strong at least through 1977. Color TV picture Diodes and rectifiers.— Sales of diodes and recti- tubes 20.0 23.0 26.5 30.5 35.0 40.0 „ , . . &r n .... Diodes and rectifiers . 6.0 6.7 7.5 8.4 9.5 10.6 fiers are foreCast to I™™** ^5 $6:? ^lT ™ Transistors 9.0 9.9 11.1 12.3 13.7 15.2 1973 to approximately $10.6 million in 1977 — an Integrated circuits ... 10.0 12.0 UA 17.3 20.8 25.0 average annual growth rate of more than 12%. Total 80.0 88.3 98.0 108.9 121.3 135.2 Demand will be strongest for silicon diodes, zener diodes, diode arrays and power rectifiers. 1 Parts and accessories not included. rt . . , . r. Source: U.S. Department of Commerce, Bureau of International Other electronic Components. bleCtroniC COm- commerce market survey. ponents outside the product category expected to have high sales potential in the Netherlands include: Sales Opportunities . Photoelectron tubes The following electronic components are expected * Thynstors to offer U.S. exporters the most promising sales * Phojosensors .. , . .. t, ,. , , , . r" , ° c • Rack and panel connectors potential m the Netherlands during the next four k ^ ,. . . , . r e • Cylindrical or circular connectors y • Coaxial connectors 1 Electronic components covered in this report are basically confined • Printed circuit connectors to resistors, capacitors, color TV picture tubes, diodes and rectifiers, « Drv reed and merCUTV Wetted relays transistors, and integrated circuits. The term "product category" as used in this publication is limited to these six groups of components. * 5>llde and rotary switches 139 Selected End-User Industries The industrial/commercial equipment sector is more important than the consumer products sector in the Netherlands in volume demand for electronic components. The most important products manu- factured within this sector are telecommunications equipment, computers, business machines, electronic instruments and industrial control systems. Holland's electronic equipment industry is dom- inated by one firm, N. V. Philips Gloeilampen- fabrieken of Eindhoven. Philips is the leading manu- facturer in the industrial/commercial equipment sector and totally dominates the smaller consumer products sector. This company, which reportedly produces more than 90% of the country's electronics output, is the Netherlands' only manufacturer of computers, TV's, radios, and stereo systems. Along with its subsidiaries, it is the largest consumer of electronic components, accounting for an estimated 60% of the total market. The outlook for growth in sales of electronic end products by Dutch manufacturers was considered extremely bright until recently, but the possible impact of the oil boycott has clouded growth fore- casts, at least for 1974. In terms of the domestic economy, present projections indicate that growth of the Dutch GNP will be minimal in 1974. Other European countries may be hit even harder. This will undoubtedly have some negative effects on the market for both consumer and industrial/commercial electronic end products, since much of the Dutch production is exported to other European countries. Of the two sectors, however, the industrial/com- mercial equipment sector should be the less affected. Purchases of high-price consumer electronic products may be postponed over the long run if budgets are severely tightened. On the other hand, a slowdown in the economics of major European countries should not greatly dampen the demand for labor saving industrial/commercial equipment, since companies will still be seeking to cut costs to offset sharply rising labor rates. Thus, sales of such products as business machines, computers, and auto- mated industrial control systems should continue to grow, although perhaps at a slower pace than previously expected. The electronic control and instrumentation in- dustry is well developed in Holland. While Philips is the leading manufacturer, there are approximately 75 small and medium-size companies engaged in the manufacture of industrial, scientific and medical in- struments and controls. Annual Dutch production of instruments is estimated at around $100 million. Strong growth is forecast for this industry, with domestic demand rising sharply for instruments used in the medical field, natural gas industry and pollu- tion control areas. The telecommunications industry likewise should remain strong as Dutch telephone companies carry out programs to upgrade their mechanical telephone exchanges to electronically controlled systems. Hol- land's Post, Telephone and Telegraph (PTT) au- thority is expected to invest more than one billion dollars over the next five years in the procurement of such systems. N.V. Philips Gloeilampenfabrieken. — Philips is the largest electrical equipment manufacturer in the world and the third largest company outside the United States. It has production facilities in more than 40 countries and sales subsidiaries in 60 coun- tries; it employs more than 360,000 people world- wide. The company's sales in 1972 were reported to total $6.2 billion. The world headquarters of Philips is in Eindhoven in south-central Holland. Philips has plants producing electronic equipment in 37 towns and cities in Holland. The greater por- tion of the company's consumption of electronic components in the Netherlands is in its plants produc- ing industrial/commercial equipment, specifically telecommunications equipment, computers, and elec- tronic instruments and controls for industrial use. Philips Telecommunicatie Industrie B.V. ( P.T.I. ), a subsidiary of Philips Gloeilampenfabrieken, em- ploys 7,200 people in Holland at plants in Hilversum (3,330 employees), The Hague (1,030), Horn (310), Huisen (1,900), Amersfoort (120), and Laewarden (520). P.T.I, produces radio communi- cations equipment, mobile telephones, telephone transmission equipment, and automatic telephone and telegraph systems. Philips Electrologica B.V. in Apeldoorn is Philps' computer subsidiary, specializing in minicomputers and medium-size general purpose computers. It is the only company producing such equipment in Holland. The company also produces computer pe- ripherals and data transmission equipment. Other Philips subsidiaries producing electronic end products in the Netherlands are Hollandse Signaalap- paraten B.V. (defense systems) and Ven Der Heem Electronics (sonar, radar and other special elec- tronics systems for military and space applications). Philips, along with CII of France and Siemens of Germany, announced in July 1973 the formation of Unidata, a holding company designed to better com- pete with U.S. computer firms by pooling European computer know-how and marketing resources. The scope of the new company's activities is not yet known. The three member firms are reported to have a 12.5% share of the European computer market. Medical systems are produced at Philips' plants in Eindhoven. The Philips Products for Industrial Use Group (IPT), has plants in Eindhoven and Enschede which produce electronically controlled industrial machines, automatic typesetting equip- ment, process control panels, and a variety of in- dustrial and scientific instruments. 140 Philips reportedly produces approximately 75% of its electronic components requirements for these industrial products, including many advanced devices such as MOS and MSI integrated circuits. However, the company is said to lag in the very latest integrated circuit developments, such as digital IC's, and buys these devices mainly from outside suppliers. It is especially in these advanced areas that U.S. com- ponent suppliers will find growing market potential in the Netherlands. Other leading domestic electronics firms. — In ad- dition to Philips, the following large foreign com- panies also produce electronic end products in Holland: the U.S. firms IBM and ITT; L. M. Ericsson of Sweden; and Germany's Siemens. Other important producers are: Singer Friden (accounting machines); Rank Xerox (copiers); Koppens Auto- matic (control systems); Tektranix N.V. (oscillo- scopes); Vitatron Medical (laboratory equipment); and Cordis Europa and Medtronic (pacemakers). A major customer for electronic components, though not ?